Amplifying Startup Power

September 2026

When conducting office hours with founders, I rely on a specific, high-leverage heuristic: "What would make this company more powerful?"

While asking how to increase revenue is a valid approach, it typically leads to incremental gains. In contrast, focusing on power can lead to increases in value by several orders of magnitude.

The Power Heuristic vs. The Money Heuristic

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1. Controlling the Ecosystem

Depending on the business model, "power" manifests in different ways. A primary goal is often to move from being a mere component supplier to the entity that owns the customer relationship.

The critical question here is: Can you make the capital flow through your platform?

The Platform Play: The gold standard is creating an "App Store" ecosystem. When you allow third parties to build on top of your product:

• Their innovation increases your product's utility.
• Their effort creates value for your company.
• Ideally, you control the interface and the payment rails.

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2. Engineering Network Effects

I view the introduction of network effects as a creative challenge—trying to find them even in sectors where they seem impossible. This shift can transform a simple service into a marketplace.

Strategies for Inducing Network Effects:

• Social Benchmarking: Allow users to opt-in to see how their performance compares to the aggregate.
• AI Data Loops: Let users opt-in to train the model on their interactions.
  • Nuance: While some resist, those who do get a model that outperforms the vanilla version, creating a competitive advantage.
• Generalization: Expand the scope of the utility.

Example: If a startup enables AI agents to pay for services, the "power move" is enabling agents to pay each other. Even if the use case isn't immediately obvious, the value of becoming a marketplace is so high that it's worth acting as a market maker to jumpstart the process.

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3. The "Full Stack" Transformation

Some strategic shifts feel almost physical. The most aggressive is going full stack.

Instead of selling a tool to companies that perform task $X$, you use that tool yourself to perform task $X$, effectively competing with your former customers. You essentially "engulf" the customer.

The "Hand Puppet" Limit Case: There is a gradual version of this where you perform the most difficult parts of the customer's job. $\text{Value} \rightarrow \lim_{\text{work done by startup} \to 100\%} (\text{Customer} = \text{Errand Runner})$ Eventually, the original customer becomes a mere proxy, and your real customer is their customer.

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4. The Tail Wagging the Dog

I always look for peripheral features that might actually be the "real" product.

Users are using the product wrong. $\rightarrow$ Users are signaling a desperate need.

When users "misuse" a feature to solve a problem you didn't intend to fix, listen closely. This is often the most valuable signal you can receive.

Case Study: PayPal PayPal's explosive growth happened because it helped users generate income.

• Rule: If your product helps users make money, adoption is faster and price sensitivity is lower.

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5. The Long Game

Playing a long-term game is a power move because most competitors are incapable of it.

• The Competition: Most startups are run by opportunists seeking a quick exit.
• The Incumbents: Most corporate executives are focused on quarterly KPIs to secure their next promotion.

Because of this, strategies that only pay off in a decade are often drastically underpriced.

def long_term_strategy(startup):
    startup.price = "as_low_as_possible" # Acquire maximum users first
    startup.focus = "value_creation"
    startup.margin_worry = False # Worry about margins later
    return startup.market_dominance

The O'Reilly Philosophy

Tim O'Reilly suggested that you should create more value than you capture.

While some see this as idealistic, it is actually the most pragmatic path to extreme wealth. Squeezing customers for every cent is a distraction; discovering a new way to provide $10\times$ or $100\times$ value is where the real returns lie.

The Open Source Example: By giving the product away for free, companies:

1. Establish a global standard.
2. Build deep user trust.
3. Accelerate distribution.