Ask HN: Do bootstrapped billion-dollar companies exist?
It seems like all companies that are valued at $1BN or more raised money in their early days.
(For more on valuation and the background, http://www.businessinsider.com/atlassian-helps-employees-poc... )
If you never take any money you don't even have a valuation, so what makes you a billion-dollar company anyway? You're just a $0 company that happens to be pulling $10M in profit per year (for example.)
I don't mean the question that started this thread is ridiculous (though it's unusual) - I just mean that the example given is a perfect answer, and your follow-up question is kind of ridic (IMHO.) Or at any rate not "the important question."
I mean just consider our specific example: at $10M profit, the price per earnings if you purport to be a billion dollar company, is 100. So, no alternative accounting metric would ever give you a billion-dollar valuation (assuming you bootstrapped, which implies high margins and low infrastructure and other costs, so really nothing would give you the billion-dollar valuation.)
I'm not an accountant, but from how I've experienced things, only if the company sells shares and establishes a valuation thereby can value the company at $1 billion in our example.
In the context of the real world, your way is quite an odd way to interpret the "requirement" -- no money taken, ever, until the very first money that is sold for a percentage is raised at a valuation of $1 billion. Why? Why not let the first valuation be lower?
Under a more reasonable interpretation, i.e. totally bootstrapped, and eventually reaches $1 billion, the stated company meets the criteria. It's worth triple that now, and $60 million as a first raise eight years in is proof positive that it's a "totally bootstrapped business".
I can see where you're coming form, if the question is interepreted as "can I become a billionaire without selling any equity, by completely owning a billion-dollar totally bootstrapped business", but then it isn't nearly as interesting.
We were actually forced by my company to move our "How to use this repo, get it up and running, etc" documentation out of README.md at the root of our github repos, to the Atlassian Wiki because, "this is how we do things now."
Fuck your terrible editor that adds random double spacing, and in general, fights me at every turn.
And the fact that at almost every standup, or planning meeting, we end up fighting some Jira issue that makes it obscenely hard to plan the way we want.
Your software makes it harder for me to get my job done. It is not good. I don't care if HN down votes me to oblivion. Your company has failed to make a good product. If you've read this, I feel better.
Oh and "Enterprise" is the problem. Let's use complicated shit that doesn't really solve anyones use cases particularly well, but manages to fudge along for everyone so seems like a big win for idiotic top down managers.
If the tool isn't helpful, don't fucking use it. I can draw you a diagram if that would help. If someone is forcing you to use an unsuitable tool, where do you think you should direct your opinion?
Yes, it sucks that I'm forced to use a crappy tool. That happens all the time in the software world. Sure, you can take the HN fantasy path and quit every job you have every time you disagree with something, but you'll never make any real progress that way. I'm still working hard to ship a good product in spite of the fact that some aspects of how I build it will be sub-optimal.
However, if the people that work on shitty products would fight back a little bit more, perhaps those of us forced to use them wouldn't find it so distasteful.
Out of tech companies -- Craigslist, Atlassian, 37Signals, possibly MailChimp.
Fringe examples -- Indeed sold for $1B and only took a small amount of later-stage funding [1] from USV. WhatsApp took $8M from Sequoia but apparently didn't spend any of it [2].
[1] http://avc.com/2012/09/indeed/
[2] http://forbesindia.com/article/the-worlds-billionaires/the-$...
http://signalvnoise.com/posts/1941-press-release-37signals-v...
As a result of being bootstrapped, the 2011 sale single-handedly put its founder, Bob Parsons, on the Forbes billionaires list: http://www.forbes.com/profile/bob-parsons/
In 2013 the company lost $199.88 million and in 2012 they lost $279 million .
http://techcrunch.com/2014/06/09/godaddy-files-for-100m-ipo/
(just a minor correction as I am not the biggest fan of GoDaddy)
This means that if it costs them $200 to acquire a new customer and that customer immediately whips out their CC and buys $1k of domains spread over ten years then, at the end of the year, they "lost" $100 on that customer and have to console themselves by drying their tears on $800 in cash.
It also makes their balance sheet look over leveraged due to the $900 in unearned revenue booked as a liability.
On the other hand, most time when tech companies chafe under GAAP restrictions, it is because they're trying "creative accounting" in the abusive rather than the creative senses of the term. Salesforce, for example, is periodically annoyed that they have to account for stock-based compensation to employees. Well, yeah, you can't simultaneously say "Equity grants are why people work for startups" and also say "But on the other hand they're totally free." They also have some other things which are apparently allowed in their GAAP accounting but... are rather aggressive, like $3.5 billion in goodwill on the balance sheet.
Disclaimer: I have in the past held, and currently hold, options positions which express the opinion that CRM is far overvalued and which profit if the market decides to agree with me.
This makes a lot of sense for chickens. It feels to me like it makes a lot less sense when I'm selling you something with a COGS which is too cheap to meter and where there is essentially no meaningful risk to delivery.
To see this, imagine what happens if he has to break his promise to deliver, perhaps because all his chickens get swept out to sea and there are no substitute chickens available in time. He owes you a refund. How much does he owe you? Having spent our lives doing deals like this, we intuitively know the answer: $25. He has to give back all the money you paid. That's why the liability is $25.
Now, once an actual chicken gets handed over to you, and you agree that it satisfies the chicken contract, things are different. Now the $25 liability changes into a $5 cost-of-goods-sold (assuming that wholesale chickens cost $5) and a $20 increase in equity (aka "profit").
(More or less, I think. I'm not an accountant.)
What's really instructive about his story is that he started his first retail store when he was in his mid-late 20s, sold that and earned his first stripes in his early 30s. And it wouldn't be a decade later until he started Walmart in his early 40s.
Walmart was a culmination of several decades of Walton's life that he dedicated to mastering, and dominating, retail.
Edit: Not to say he was in the military, it's a metaphor for how Walton gained experience and 'rank' in retail.
http://www.nytimes.com/1981/06/23/business/kuhn-s-big-k-stor...
http://hbr.org/2013/10/chobanis-founder-on-growing-a-start-u...
Nothing wrong with that, just found it interesting. Good reminder that there are a number of different ways to grow an amazing company.
Regardless, still a great story.
See http://thedailywtf.com/Articles/A_Case_of_the_MUMPS.aspx
I found another article that says Epic prefers to hire fresh college graduates because they're easier to mold into the "Epic Way."
And I almost certainly got hired there because I actually knew MUMPS from a previous job. Of the developers they hired during my cycle, every one of them was on an H1-B or fresh out of Carnegie Mellon or MIT; meanwhile I was a kid with a sub-3 GPA from a liberal arts school with a Political Science degree.
(If you do some light searching, you can find another famous story on TDWTF that I wrote about MUMPS.)
Funny, they rejected me from even interviewing with a 3.01 GPA and a Computer Science degree because my GPA wasn't high enough. It worked out well, though, and I'm glad I never had to live in Madison.
http://www.inc.com/christine-lagorio/bootstrappers-bible-shu...
http://allthingsd.com/20120709/github-valued-at-750m-with-fi...
"Schmieding takes a shot at those who choose the easy route to entrepreneurial success, writing: “The era of personal sacrifice and risk taking has been replaced today with venture capital and IPOs that use other people’s money as collateral"
Ok, it's off-topic as this was in 1981, but the valuation is way north of $1bn...
That is an understatement ... MSFT's current market cap is $366 bilion and the all-time high market cap was $616 billion in December 1999.
I suspect a disproportionate number of bootstrapped companies that fall into the might-become-$1BN category get an offer they can't turn down at some point before they arrive.
http://www.deere.com/wps/dcom/en_US/corporate/our_company/ab...?
http://www.deere.com/wps/dcom/en_US/corporate/our_company/in...
If no one invests in it, and you are clipping coupons, how would you know you have a billion dollar company? You could have $100 million a year in earnings and some growth, and have a pretty good idea, but you don't know. Conceivably, whatsapp could have bootstrapped their way to $1 Billion before they accepted VC money, but even they may not know.
Appraisers can value your company above a billion dollars without you ever taking on an outside investor. If someone does go to invest, they're going to hire their own appraiser (or entire firm of economists) to determine how much your company is worth prior to investing.
Appraisals aren't free, but they have significant long term benefits. Their estimate of your company value tends to be as accurate as any potential investor's estimate (competing biases on other sides of the ideal valuation).
In a talk given by Bill Gates, he mentioned that Microsoft only took on an investment once and it wasn't because company needed money but because Bill Gates wanted to bring on an investor to be on Microsoft's board of directors and that was the only way to do so. Supposedly that investor has been on the Microsoft board for decades.
Obviously because they technically did raise funding, might not satisfy the question