Keith Rabois's formula for startup success

September 30, 2023

In the clip below, Founders Fund GP Keith Rabois explains the viral tweet that’s pinned to his profile, which reads:

“Formula for startup success: Find large highly fragmented industry w low NPS; vertically integrate a solution to simplify value product.”

He argues that fragmented and low-NPS industries have created massive opportunities for many of the world’s most successful companies:

“If you have a fragmented industry there’s usually structural reasons why, and a bad NPS means customers are not delighted.”

He uses ride sharing companies, such as Uber and Lyft, as an example. The taxi industry was both highly fragmented and had a low NPS, which created an opportunity for Uber and Lyft to simplify the value proposition and stitch together a smooth experience in a vertically integrated way. Square is another example he cites.

He continues:

“I love vertically integrated businesses. They are difficult to build but they’re more successful if they work. Think Apple… What I learned growing up was that in any industry if you want to be successful, you emulate people who are successful. To me, it’s always been shocking that most founders are not emulating Apple… Nobody can compete with Apple because they're vertically integrated.”