PayPal Founder in Israel: Too Much Copying and Not Enough Innovation in High-tech

Billionaire Peter Thiel visits Israel – and gives out tips on how to build a successful startup

Peter Thiel, co-founder of PayPal Inc., answers a question during a news conference at the National Press Club in Washington, D.C., U.S., on Monday, Oct. 31, 2016.
Peter Thiel, co-founder of PayPal Inc., at a news conference at the National Press Club in Washington, D.C. in October 2016. Andrew Harrer/Bloomberg

Billionaire and high-tech entrepreneur Peter Thiel arrived in Israel Tuesday to speak to a small, select audience of entrepreneurs and others from the Israeli high-tech industry at the Peres Center for Peace and Innovation in Tel Aviv-Jaffa.

The best example of a successful technology company is Google, a search monopoly without competitors, he told the audience. His speech focused on the book he wrote in 2014: “Zero to One: Notes on Startups, or How to Build the Future,” which has become required reading for high-tech entrepreneurs all over the globe. 

Thiel has come to Israel to visit the companies he owns and the startups his funds have invested in, say sources in the high-tech industry.

The main point of the book concerns the importance for companies to move from “zero to one,” that is, when they answer a need and create something that did not exist before. According to Thiel, the minute you reach “one” it is possible to reproduce this success infinitely. He believes the future can be shaped, but to do so it is first necessary to plan how the future will look.

His criticism of most startups is that they do not innovate or create a new product, but mostly copy and make small improvements — but not revolutionary ones. The next Mark Zuckerberg will not be someone who reinvents Facebook, and the next Bill Gates will not be someone who founds Microsoft again. Thiel says his message is the book is not to compete with one another but to invent something new.

They teach us from a young age to imitate — language, behavior, norms — and they also teach us in school to compete with one another. Sometimes the feeling in Silicon Valley is that people suffer from social disorders, says Thiel. It is an environment where people look at what others are doing and copy them.

Like a marriage

Another problem is that people speak in buzz words; for example: I build software as a service technology — connectivity software — that makes data into a cloud, he says. Everyone is throwing out such words. But why did Facebook succeed, he asks? When Facebook began there were other social networks, but Facebook was the only one that gave people an identity on the internet and that is what made it powerful. It may still be labeled as a social network 13 years later, but it is much more, says Thiel.

To establish a good company a number of important components are needed, says Thiel. The first is for the founders to know each other well, a relationship he compares to a marriage. One of the questions every company needs to ask itself at the beginning is not who it will hire tomorrow, but why will it need to hire the 20th employee. Why will he want to join the company in the future? What will draw people to the company?

Innovation cannot come from large corporations that already have their own culture, and internal politics can cause new ideas to fail. So startups will always be important, and innovation mostly happens through creating new companies, says Thiel. Today there are no longer financing problems and if no venture capital fund will finance the startup, it is possible to turn to crowdfunding.

In Thiel’s eyes, Israel is not just the “Startup Nation,” but a success story that is actually a result of its small size. He says the United States is huge and California’s Silicon Valley has a different culture than elsewhere in the United States, and the managerial culture and dynamic is different all over the United States.

Thiel made the headlines — numerous times — last year after he was one of the very few senior figures in Silicon Valley who supported Donald Trump for president. He stood out in particular because almost all the heads of major high tech companies, from Apple to Facebook, supported Hillary Clinton. His support for Trump earned him a senior advisory role in the new administration, and Trump appointed him to the executive committee of his transition team.

Thiel’s net wealth is estimated at $2.7 billion. He has founded and invested in dozens of leading technology firms, including PayPal, Facebook, LinkedIn, Spotify, SpaceX and Airbnb.

In 1998, Thiel founded the online payment service PayPal, which he sold four years later for $1.5 billion to eBay.

Thiel also became one of the first investors, and the first outside investor, in Facebook, when he bought a 10.2% share of the company for $500,000 in 2004. He sold most of his stake a few years later for over $1 billion, which was considered to be one of the best deals ever made.

Today Thiel is a partner in the Founders Fund venture capital firm.