Market monopolies are fairly well understood. They exist when a company has exclusive control of a market. In startup terms, when you are 10 times bigger than the next largest competitor, you are entering monopoly territory.
However, I’ve recently been thinking about a different type of monopoly, and the impact it can have on a startup’s trajectory: not of market but of talent.
A talent monopoly exists when a company is able to exclusively attract all of the best people who are passionate about a growing market. The company is able to do this by establishing a reputation of being by far the most appealing place to work in that market.
For example, if you wanted to work on payments in the early 2000s, you went to Paypal. If you wanted to to work on social in the mid-2000s, you went to Facebook. If you want to work in travel today, you work at Airbnb.
The idea is that the most talented people are mission-driven and therefore define their job search vertically as opposed to horizontally. They start with the industry they are most excited about and work their way through best companies, as opposed to conducting a broader canvass of interesting companies across technology. They want to work to invent the future of a specific market such as robotics, biology, or VR, and their market of choice is non-negotiable.
Like a market monopoly, with a talent monopoly it is not just marginally better to be the best company in a market than the second-best company, it is an order of magnitude better.
While a market monopoly is not within reach of startups (and ultimately illegal if you get there), even the smallest startups can start to build some kind of talent monopoly. Below are dynamics that can help:
- Build products that have never been built before — To build a reputation for being the most interesting and ambitious place to work in a market, you have to be working to invent the future of that market. Great people gravitate to the leading edge of an industry, where both innovation and uncertainty of outcome are highest. This is where they can have the largest impact on the future.
- Align the company with a theme people are already excited about — Big markets with strong public benefit to innovation like education and healthcare have a large base of people who already want to work in them. Many people will naturally be attracted to the most interesting company in the space. This is also true for hobbies that people are passionate about, like cooking, music, or sports, as well as emerging technologies like robotics, drones, or AR. This makes it easier to build talent monopoly dynamics. However, it is a harder to build in markets like consumer packaged goods or B2B software. These markets might not be organic magnets of talent, so a bit more heavy lifting is required to evangelize why the market is interesting. This could be a great “why now” narrative that is tied to macro trends, the use of an emerging technology, or leveraging a distribution channel in a new way.
- Place the mission at the center of the company — Being a mission-driven company provides an advantage in attracting capital, customers, and talent. Simplicity of product and organization is often a startup advantage, and the same is true with mission. Incumbents often dilute their sole mission over the course of decades, meaning if as a startup you can place the mission of your business more front and center than others, you can attract mission-driven people who care deeply about a market.
- Make sure early hires really care about the market (and screen out those that don’t) — At my last company, our goal was to build the best place to work if you were passionate about books. Each of our first 10 hires was mission-driven about inventing the future of reading. The result was that if you ever interviewed at our company, a good portion of the interview was spent talking about the future of books. If you wanted to work in books, this was attractive. We definitely lost talented people because they weren’t passionate about books, but this approach enabled us to hire people we otherwise would not have been able to attract, and build a very specific culture early on.
- Highlight the process, not just the output — Great people who are passionate about a market want to learn as much about it as they can. While every company highlights new product launches externally, most do not give deeper insight into the process going on behind the scenes. This can include items such as engineering deep-dives, insight into how the company operates organizationally, or providing a view into the product roadmap. This gives differentiated information to potential employees who are passionate about the market, which then differentiates the company.
Product innovation is the output startups produce. The best companies over the past few decades have been able to produce product innovation both faster and more frequently than competition. I think this is in large part because, at least for a defined period of time, they soaked up all of the best talent who were passionate about a given market. In other words, they were able to build a talent monopoly.
Looking for where these talent monopolies are being built is a good way to find companies that are set to break out. Further, observing large markets that are not saturated by startups, but nonetheless have high latent interest among talented people may reveal the best areas to start new companies.
Conversely, when product innovation at a company starts to falter, it may be a sign that a company has lost a talent monopoly, and in turn another company may have gained it.
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