Peter Thiel's Startup Scoring Framework
Peter Thiel’s investment philosophy centers on identifying and backing startups that escape competition by building monopolies through unique insight, technology, and defensible market positions. His thesis diverges from conventional venture capital by prioritizing foundational differentiation over incremental improvement, and durability over short-term traction.
Below is a structured version of Peter Thiel’s Investment Thesis:
1. Monopoly over Competition
Core belief: “Competition is for losers.”
The most valuable businesses dominate their markets with little or no direct competition.
Competitive businesses see profits driven to zero; monopolies earn sustainable margins and accumulate cash.
2. Start with a Small Market, Expand Later
Great companies begin by dominating a small niche that others overlook.
Once a monopoly is established in a narrow vertical, it can expand to adjacent markets in concentric circles.
Going after large markets too early often leads to fragmentation and defeat.
3. Proprietary Technology is the Foundation
A startup must have a product or process that is 10x better than its closest alternative.
Sustained technological advantage forms a high barrier to entry.
Thiel avoids investing in companies with “incremental improvements” or commodity technologies.
4. Secrets and Contrarian Thinking
The best startups are built on a secret: an important truth known by few others.
Thiel looks for founders who see value where others see nothing or impossibility.
The key question: “What important truth do very few people agree with you on?”
5. Strong Founder-Led Teams
Thiel prefers mission-driven founders with intensity, focus, and deep conviction.
Startups should be led by visionary individuals—not by consensus-driven, interchangeable executives.
Ideal founders are not just technical, but also possess a unique worldview and are driven to reshape an industry.
6. Defensibility and Long-Term Durability
Great companies have moats: technology, network effects, brand, scale, data, or legal/regulatory barriers.
The most valuable businesses will still be dominant 10–20 years from now.
Thiel emphasizes “last mover advantage”—being the final, enduring leader in a category.
7. Non-Memetic Strategy
Avoid startups that simply follow trends (e.g., clone markets, copycat apps).
Thiel seeks companies that create new markets, rather than fight over existing ones.
Mimetic behavior (copying others) leads to crowded, competitive markets.
8. Explosive Growth Potential
While starting in a small market is ideal, Thiel looks for a credible path to massive scale.
A business should have the potential to generate outsized returns through dominance of a growing or expandable market.
9. Fast Adoption in a High-Leverage Environment
Software and digital platforms are favored due to low marginal cost, scalability, and rapid adoption curves.
Fast adoption helps prevent competitors from entering before the company solidifies its dominance.
10. Asymmetric Outcomes and Power Law Returns
Venture investing follows a power law: a few startups will generate most of the returns.
Thiel prefers to take bold bets on companies with extreme upside, rather than play it safe.
Emphasizes “one investment that returns the entire fund” over portfolio diversification.
Thiel's Litmus Test Questions for Founders:
What is your unique insight or secret?
How are you 10x better than your closest alternative?
What specific niche can you dominate now?
How will you scale from there?
Why will your company still be the market leader in 10 years?
Why are you the right person to build this?
Peter Thiel Startup Scoring Framework
Scoring Rubric
1 = Poor – Lacks this characteristic or flawed.
2 = Weak – Has a weak or undeveloped version of this.
3 = Moderate – Has an average presence, could be improved.
4 = Strong – Above average, well-articulated.
5 = Outstanding – Core strength and clear differentiator.
Total Score: /50
45–50: Exceptional. Strong candidate for funding. Likely monopoly in the making.
38–44: Very promising. Worth strong consideration with further diligence.
30–37: Good, but may lack key monopoly traits. Needs sharpening.
20–29: Weak strategic position. May be too competitive or undifferentiated.
<20: Not aligned with Thielian investment criteria.
PROMPT ENGINEERING
Stage 1: foundation
Prompt 1: contrarian_insight
what unique insight does {{company_name}} hold that most people in {{industry}} would disagree with? explain why this is a secret and how it creates a unique opportunity.
Prompt 2: founder_quality
describe the background, skills, and vision of {{founder_name}}. how is this founder uniquely positioned to build and dominate {{company_category}}?
Prompt 3: mission_and_purpose
what is the long-term mission of {{company_name}}? how is it different from competitors in terms of ambition and intent?
Prompt 4: team_leverage
how strong is the current team at {{company_name}} in terms of quality versus quantity? highlight any unusually high-leverage hires or capabilities.
Stage 2: monopoly_creation
Prompt 5: initial_market_selection
what is the initial niche market {{company_name}} is targeting? why is this market small enough to dominate and large enough to expand from?
Prompt 6: product_10x_advantage
how is {{product_name}} at least 10x better than current alternatives? explain the specific metrics, outcomes, or user experiences where it wins.
Prompt 7: go_to_market_strategy
what is {{company_name}}'s strategy to acquire its first 1,000 loyal users or customers? how is this approach defensible or unique?
Prompt 8: unique_distribution
what distribution advantage does {{company_name}} have (e.g., channel, community, embedded network)? how will this prevent competitors from following?
Stage 3: scale_and_defense
Prompt 9: network_effects
does {{company_name}} benefit from network effects? explain how each new user increases the product’s value for others.
Prompt 10: economies_of_scale
describe how {{company_name}}'s costs will decrease or margins will improve as usage increases. is there strong operational leverage?
Prompt 11: data_advantage
what proprietary or user-generated data does {{company_name}} collect? how does this data improve the core product or create a barrier to entry?
Prompt 12: brand_or_mindshare
what early signals suggest that {{company_name}} is becoming a brand that users remember or recommend? what emotional or cognitive lock-in exists?
Prompt 13: legal_or_regulatory_moat
does {{company_name}} have any legal, regulatory, or licensing advantage that protects its market position?
Stage 4: longevity_and_value_capture
Prompt 14: last_mover_advantage
what evidence supports that {{company_name}} could be the last mover in its category? why is it unlikely that a stronger player will emerge?
Prompt 15: time_horizon
describe how {{company_name}} could continue to exist and lead its market 10–20 years from now. what mechanisms or trends support long-term durability?
Prompt 16: capture_rate
how does {{company_name}} plan to capture value from the ecosystem it is creating? estimate the potential revenue model or % of value captured.
Prompt 17: cultural_and_organizational_moat
how does {{company_name}} ensure its core values, innovation process, and team culture remain strong as it scales?