How I Grew My Company from $100 to $400M

Something else that bugs me is in the inherent contradiction in his advice..

1. tell people about your concept and ask for money.

2. if people give you money start work.

3. you will pivot 20+ times anyway

Wouldn't that be basically like sell a dream and then figure out a product/service that may make money.

Not much different to how YC like Accelerators/Incubators invest in "teams"..

Shouldn't conmen begin to flock towards such "investors" or are they already?

Also - what did the other 999,999 firms do wrong so they didn't make it to $400 million?

He somehow managed to mention both of his companies and I still have no idea what he "does."

The $100 must have been spent on phone calls to all the potential clients he asked to tell him why he should not proceed with his ideas. From reading the article, it sounds like this pre-company, ground-pounding, customer-finding is more like finding suckers who would be willing to pay him for his new product/service.

The amazing thing is the POPin product/service he is now selling to large corporations. From what I can tell, it's just software that lets people take surveys and vote on polls so the higher-ups can find out what other people in the company (and supposedly customers) think. Of course, there are mobile apps for it, so it's trendy.

What does it do? It "generates buy-in," and "leverages knowledge" in a "fun and interactive" way to "derive tangible business results." You know the "buffalo buffalo buffalo buffalo buffalo buffalo buffalo" thing, where it's a valid sentence using the same word to mean 7 different things? You clearly could do the same thing with "buzzword."

"Buzzword buzzword buzzword buzzword buzzword buzzword buzzword." And these millionaire corporate execs drink it up and hand over their money! For something they could do already, with existing software, existing employees (who are already paid to do this stuff), and people throughout the chain who should already be communicating back and forth, up and down.

It really makes one wonder if they're all just college frat buddies who, being so insulated from their companies' actual work, budgets, and successes or failures, readily agree to scratch each others' backs at the opportune times. "Oh hey, man, you got a new company selling a new mobile survey app we can use to poll our employees? Well, we could do that already for free, and that's what our managers and VPs are supposed to be doing already--but sure, here's $500,000 for one of your sessions. By the way, aren't you still on the board of the last company you founded? Would that company be interested in buying some XYZ from us? Great, that's what I thought. Good deal."

Their app doesn't do anything new or unique. Anyone could set up a web forum, a wiki, a bunch of online polls--for free. Managers should already be talking to their employees and communicating up and down the chain. Instead of just doing that, they pay this other company big bucks to use their mobile app to do it for them.

And then, after getting a few bigcorps to pay them, they put those bigcorps' logos on their web site, and write an "article" for an entrepreneur magazine, supposedly revealing some business wisdom. Then they link to those articles on their own web site, showing how smart and published their founders are. Then I suppose that sets them up to sell to the next level of suckers, the ones who wouldn't buy in at first.

I can't help but think that it's just like the old Scrooge McDuck comic, "Scrooge's Plain Old Soap." Donald starts his own soap company and sells the same soap in fancy packaging for more money--but it's still just soap. And that's all these guys are doing: repackaging existing stuff and selling it to the execs who have the corporate budgets to burn. Then those execs can point to how they "leveraged knowledge" and "derived tangible business results," and they can then "pivot" those "successes" into their next, higher-paying job.

All of this is not technology--it's salesmanship. He talks about finding "truth" and "value"--but the truth is that he's providing very little added value, merely acting as a middleman repackaging what already exists, then finding people willing to pay extra for it. Barnum covered that a long time ago. Still works, and I guess it always will. But with tech and the Internet, you'd think it'd be harder to get away with that.

Makes one wonder, who are the real suckers? The people buying that stuff? Or the ones not selling it?

For [2] and [3] it sounds like Trace3 is a technology consultancy, integrator, and services provider. So the business is more like "specialized IT for hire" than a new product or innovative technology.

As a result, I'd guess that the $400MM is gross revenue over the life of the company (not annual), and a large portion went to vendors like Avaya and Rackspace that he set-up for the clients.

Then again, this is just reading between the lines, I have no direct experience with Trace3.

regarding your point 1, let's see what happens if $100 isn't a red herring. Let's call this assumption H+ (a real herring? I don't know. Anyway, it's H+. The entirety of the comment below is from the perspective of H+, i.e. that it is not a red herring, but a meaningful actual seed amount that made a difference.)

If it's not a red herring, then it is far more impressive to turn $50 into $400M than to turn $100 into $400M, as that is a factor of 8million versus a factor of 4 million only. It's twice as good. But turning $1.50 into $400M is even more impressive, as (by H+) in this case this is a factor of 266 million, i.e. 33 times better than a factor of just 8 million. Likewise, if he had turned $1,000 into $400M it would have been only a factor of 400,000 and if he had turned $10,000 into $400M it would have been an even less impressive factor of 40,000. And if he started with $100K, a decent but by no means excessive seed, the factor would have been only 4,000. (There are higher seeds, not mentioned here.)

So we have data points for factor returns ranging from 8 million to 4,000, and (by H+) his data point actually legitimately falls at exactly 4,000,000x return attained.

Now what is impressive is that if there EXIST data points at seed multiples of 4,000,000x return, they should be investable data points around that value, with a capped upside. It should be possible to angel somebody else's business for values ranging from $1.50 (aggregate total fully subscribed seed round) to $9,000 (i.e. 90x as high as the seed round we are discussing from the article). That is quite remarkable, if true. H+ has remarkable consequences.

I can actually answer this. The idea that started my company way back in the 1990s was an ok idea, but it was not fantastic. What was fantastic about it was it had a magic balance between complexity and intuitiveness. What happened when I told people about it is was the first 30 minutes they sat there totally confused, but at some point around the 30 to 45 minute mark they would have an eureka moment where everything would fall into place and they would get it. The effect of this was truely amazing - basically people would come to believe that they had thought of it themselves and of course at that point selling was not a problem - people literally gave me large amounts of money for free because of this effect.

I should mention that while I have had much better ideas since (as well as lots of worse ones), none have ever had that magic quality. All I can say is look for ideas that allow people to discover the eureka moment themselves after 30 minutes. Once you have this you almost can't fail to raise money.

You do it the same way you sell a $35k website or a $35k/year SaaS product: you paint a better tomorrow that the prospect wants to buy into.

Large, badly managed companies have "budgets" per department that have to be spent or it looks like the department head wasn't working well enough. If they don't spend the budget, someone else gets it for the next cycle. It also gives the (utterly idiotic) impression that the department head wasn't doing a good job because they could have used that money to "grow the business" in some nebulous way. So when you're close to the end of the budget cycle and have 100k left, and a spiffy salesman comes along asking for 35k for his "concept" it looks like a great solution for everyone.

Who knows, maybe it will work out really well and now you've shown incredible "vision". If it doesn't work, you're well within budget and have shown "a great appetite for risk" or something like that.

The author positions his pitch about being all about the product and the value the customer sees in it, when I think a large portion of the potential client's decision to pay 35k is based on this guy's ability to actually bring it to market. If the potential client has no idea who you are, I think it'd be crazy difficult to sell them on a 35k "idea". They'll need to get to know you, and the author doesn't really touch on that point.

You might want to look into Bill Gates' history with IBM.

How is that any different from any other software project? You talk to the client about their needs, you agree on the price, and you build it.

Well, think about it: selling frobnobs to average consumers at a profit margin of 1% is difficult and risky. But if you can sell fribfrob-as-a-service to the corporate executives that run bigcorps that already successfully sell frobnobs to average consumers, pooling large sums of money together in corporate coffers, then you can do a lot less selling for a lot more profit.

It's like running a landscaping business: you don't go to the poor side of the tracks and offer to mow small lawns for 50 cents. You go to the people who live by the country club and offer to mow big lawns for $50.

In the first paragraph the author states: 'I started a company called Trace3 with $100 and grew it to over $400 million in revenue'.