According to Peter Thiel, high growth metrics aren’t enough to build a unicorn; you need to have a durable business. Measuring growth using metrics like MRR, ARR and Churn are easier because they are quantitative measures. However, measuring durability is somewhat difficult because durability is a qualitative measurement.
Although we can’t assign a numerical score for durability, we can make the business model more durable by using four strategies listed below. More durable the business, the more likelihood of giving birth to a unicorn
Build proprietary technology
To build proprietary tech, the technology should be 10 times better than the closest substitute (10x rule). Think of Google’s search algorithm which is far superior to other search engines.
Network effects make a product more useful as more people use it. To create network effects, you need to first start with a small market where a typical MBA wouldn’t see any traditional business opportunity. Facebook is a prime example of a company that capitalized on network effects. In the early days, there was no strategy for monetization or a clear business opportunity for connecting schools with other schools.
Economies of scale
It’s easy to achieve economies of scale in the tech space. The marginal cost of adding a subscriber is very minimal. Unicorns enjoy economies of scale.
The stronger the brand you create, the more durable your business becomes. However, begin with the product and focus on improving it. Starting with the brand and then focusing on products is dangerous.
If you look at all the unicorns today, you’ll see one or more of these factors in their business model. Before claiming your startup the next “unicorn”, see if you have any of these qualities. If not, reiterate the business model. Finally, focus on measurable growth first. Then improve durability.
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