Zero to One
Zero to One

Zero to One

In 1906, economist Vilfredo Pareto discovered what became the “Pareto principle,” or the 80-20 rule, when he noticed that 20% of the people owned 80% of the land in Italy—a phenomenon that he found just as natural as the fact that 20% of the peapods in his garden produced 80% of the peas. (Location 951)

try to profit from exponential growth in early-stage companies, a few companies attain exponentially greater value than all others. (Location 958)

Venture funds usually have a 10-year lifespan since it takes time for successful companies to grow and “ (Location 965)

They know companies are different, but they underestimate the degree of difference. (Location 971)

If you focus on diversification instead of single-minded pursuit of the very few companies that can become overwhelmingly valuable, you’ll miss those rare companies in the first place. (Location 978)

This highly uneven pattern is not unusual: we see it in all our other funds as well. The biggest secret in venture capital is that the best investment in a successful fund equals or outperforms the entire rest of the fund combined. (Location 984)

VCs. First, only invest in companies that have the potential to return the value of the entire fund. This is a scary rule, because it eliminates the vast majority of possible investments. (Even quite successful companies usually succeed on a more humble scale.) This leads to rule number two: because rule number one is so restrictive, there can’t be any other rules. (Location 986)

This is why investors typically put a lot more money into any company worth funding. (Location 993)

However, every single company in a good venture portfolio must have the potential to succeed at vast scale (Location 997)

we focus on five to seven companies in a fund, each of which we think could become a multibillion-dollar business based on its unique fundamentals. (Location 998)

The most common answer to the question of future value is a diversified portfolio: “Don’t put all your eggs in one basket,” everyone has been told. (Location 1029)

But life is not a portfolio: not for a startup founder, and not for any individual. An entrepreneur cannot “diversify” herself: you cannot run dozens of companies at the same time and then hope that one of them works out well. (Location 1033)

People got busy: entrepreneurs started thousands of cleantech companies, and investors poured more than $50 billion into them. So began the quest to cleanse the world. (Location 1759)

It didn’t work. Instead of a healthier planet, we got a massive cleantech bubble. (Location 1760)

Cleantech entrepreneurs aimed for more than just success as most businesses define it. The cleantech bubble was the biggest phenomenon—and the biggest flop—in the history of “social entrepreneurship. (Location 1901)

The ambiguity between social and financial goals doesn’t help. But the ambiguity in the word “social” is even more of a problem: if something is “socially good,” is it good for society, or merely seen as good by society? (Location 1906)

The best projects are likely to be overlooked, not trumpeted by a crowd; the best problems to work on are often the ones nobody else even tries to solve. (Location 1913)