Want To Build A $1B Consumer Company? Long-Haul Founders, Don’t Fear Incumbents | Hacker News Reader

Want To Build A $1B Consumer Company? Long-Haul Founders, Don’t Fear Incumbents

techcrunch.com

28 pointspaulsutter12 comments

The article starts with some interesting data but instead of analyzing the data to identify tangible, shared characteristics of $1B exits, it devolves into a generalized, vacuous argument that boils down to (1) be in it for the long-haul, (2) work with visionary/tenacious teams (whatever that means) and (3) have founders with strong product sensibilities.

In short, this doesn't really provide useful guidance on how to build a $1B consumer tech company.

I found the list of companies very interesting, particularly it's short length compared to the much larger number of current private startups with valuations north of $1B

Did you expect a secret formula? Examples are all you will ever get for a sample size this small.

Of course here's a foolproof method:

http://longorshortcapital.com/four-simple-steps-to-becoming-...

Also found the list interesting and thought there was an opportunity to dive into those companies to look for commonalities in their business model, strategy, technology stack, UI/UX, etc etc.

While there is no secret formula or nor was one expected, several hundred words to say $1B companies require hard work, have awesome teams and founders and take some time to build felt more than a bit underwhelming.

These are just obvious necessary conditions, like "start a company" is necessary to have a $1B company. They aren't sufficient. The article's title implies that they are, which is disingenuous.

"Want to build a $1B consumer company? Don't quit before it's worth $1B."

38 exits north of $100M in five years and only 9 beyond $1B.

If making an exit is what you dream for, you might want to look at the $1-10M class which is much more likely to happen and would still provide for a comfortable life.

What can you do with $1B that you can't do with $3M?

yachts, mansions, never working again, fund a company to fly to the moon or revolutionize Electric Cars, Work to End Polio.

30 or 300 perhaps. But I can pretty quickly think of ways to use up $3M.

I could easily "never work again" with $3M.

Literally thousands of things.

Interesting to note that only 3 out of the 8 $1B+ IPO-exit companies have current valuation that is greater than valuation at exit. Those three are LinkedIn, Kayak, and Yelp.

As for the rest:

FB -$35B

Groupon -$14B

Zynga -$5.8B

Pandora -$1.8B

HomeAway -$500M

This one has a highly link-baity title, and i clicked on with suspicion, since techcrunch.com does have a reputation of exaggeration, but data was interesting, the points/hypothesis he makes sound weak, but i am not surprised. it's probably impossible by the very nature of uncertainty involved in building a 1Bn company* to get any more rigourous hypothesis backed by data.

-(excuse the antifragile bias, am currently reading the book)

*-- just a personal opinion

Is LinkedIn really considered a consumer company?

For what it's worth, I'd like to share my own ideas about what makes a company grow fast and become a billion-dollar company. I'm writing from the perspective of a founder -- and though I'm not an investor, I am choosing to invest many years of my life into building something, which I think requires in some ways a greater degree of commitment and confidence than putting in money alone.

Building blocks for a great consumer company. You will need:

1. An existing social network (e.g. colleges)

2. A channel not (yet) clogged with spam (such as facebook photo tags)

3. A business model that complies with current regulations

4. Founders who are experts in their field, and passionate about the problem to solve

5. A set of processes, developers and systems with a proven track record of producing good products (development stack, version control, etc.)

On top of these things, any idea that solves an actual problem for people AND compels them to invite others should, if done right, at the very minimum make your money back if it makes money at all. Once the founders get traction and optimize the metrics, exponential growth should cut customer acquisition cost to zero. All this is repeatable and that's why if I was an investor, I'd look for the above formula because I'd know how it can lead to success step by step, and how to fix things if they went wrong.

I want to note that this is not the only formula for success, that is to say not all the aspects are strictly necessary, but taken together they are a good predictor of success. Enterprise B2B companies for example can follow a different formula build a great living for many years, but will ultimately be disrupted by consumer tech, like people increasingly switching to MacBooks or Google Apps.

I actually wrote two articles dealing with this in the last few years: http://qbix.com/blog/index.php/2011/04/what-makes-companies-... http://luckyapps.com/blog/?p=12

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