We Also Failed to Build a Billion Dollar Company(medium.com) |
We Also Failed to Build a Billion Dollar Company(medium.com) |
I have, myself, like pretty much everyone on this planet, never built a billion dollar company.
As much fun as it might be to be that rich, it's never seemed to be more realistic to think that than to think about being an astronaut. So the interest to me is the metanarrative that's formed that says, yes, this is something achievable.
TechCrunch says there were 23 billion dollar exits in the first eight months of 2018. Call it 35 per year.
That’s about as likely as being on a Superbowl-winning football team.
Young people often neglect realistic opportunities for success to chase unrealistic dreams. As do entrepreneurs.
https://techcrunch.com/2018/08/18/global-unicorn-exits-hit-m...
You're missing half of the equation. There are a relatively tiny number of people (I assume mostly scientists and military pilots) who have set themselves the goal of becoming an astronaut and are working towards it in a concrete way.
In contrast, virtually everyone is trying to make money, and a huge number of people create companies. Not everyone has "a billion dollars" as their specific goal, but the implicit goal of "as much money as possible" is not uncommon.
I failed at building a billion-dollar company too, a decade ago, but my consolation prize was working for Google, which was pretty good. Still working on building a billion-dollar company the second time around. I work harder and make less than I would've if I'd stayed at Google, but I'm not really passing up too much. Mostly just the opportunity to own an overpriced Silicon Valley quarter-acre Eichler.
Where would rock and roll or rap be if so many young people didn't "foolishly" pursue their dreams? Where would technology and the internet be?
And isn't it simply the nature of the pursuit? If a pursuit is "high risk and high reward", it naturally creates a few spectacular successes and a bunch of "failures".
And while I assume ycombinator's target are high risk, high return ventures, it's extremely nice that this forum exists under their purview. It must incur some cost to run after all.
The point is really that taking VC money requires you to try for a billion dollar company. Founders should think hard before they commit to that path.
P.S. Kongregate gave me one of my first tastes of passive income. Thank you!
I made 8 simple Flash games that generated a bit over 20k in ad revenue from 2009-2011 (very little came from Kong though). Anyone can download and host a Flash game on their own site, which meant my games would spread to hundreds of websites and I still get paid for the ads.
This seems like an extremely unnatural growth rate. It cannot possibly be sustainable in the long run. I dont know what tricks they are expected to use to achieve the ROIs but definitely, it's some kind of magic trick because this is not natural. How can someone predictably and consistently grow by 20% per month. Not possible. Why is it that the growth rate is almost always correlated with the size of the investment. This is software, production cost approaches 0 at scale, it makes no sense.
The only way to suggest that even for a moment is to compare it with a hypothetical state of affairs where capital is available from purely altruistic sources. Compared to the actual alternative state of affairs without the availability of capital - the lot of humanity for most of history and geography - blessings that exist in the real universe don't get any more unmixed.
Most of the problems I read about here in HN from founders come from information asymmetry: VCs have much more experience in negotiating. Still, I can't pity the founders, as it's always the employees in startups that get the worst deal. I was working only 1 year at a startup in my life as an employee, and I got burned out after 1 year. Working at a big company is so much easier, as it has the network effect already.
I really don't understand why people are risking that to be a billionaire with a small probability, when the difference in the lifestyle that that money allows is probably not that big.
I'm sure it's cool to be a billionaire for some time, but also it probably wears out quite fast when you get back to work.
Before I was at EA, I started a game studio in the CD-ROM era. We published an RTS-puzzle hybrid game through Activision, which was a critical success but a commercial failure. Because of the distribution and funding model then, Activision owned the copyright. That meant that we couldn't make a sequel to correct the things we'd screwed up the first time around.
When we started Kongregate in 2006, internet distribution was there, but it was very hard to make money. There were no smartphones and Steam only distributed Valve games.
The goal of Kongregate was to fix that. We contributed to the change, though smartphones, Steam, and digital distribution on consoles were the big drivers of course.
Edit: Doing a quick nostalgic search, it looks like there ended up being at least one other effort to reboot it that went somewhere. Nice!
- Iff your market is very large, and
- Iff you have well-known customer acquisition channels that are deep, with well known customer acquisition costs
- THEN you should be able to grow 20% MoM simply by spending 20% more on customer acquisition every month.
To grow 20% MoM means you're grow 9x over the course of a year...and when you think about things things this way it makes sense why a seed round of VC is ~$1MM and a series A is ~$10MM.
So why limit oneself to 20% monthly growth? Well, because it takes time to learn how to deal with the scale.
More realistically, what (should) happen is that you have SOME known channel that will grow you say, 5x, if you spend 20% more on acquisition every month. So the next five months are spent doing two things in parallel: learning how to deal with the new scale, and desperately looking for a new channel. Fail at either and you die. Succeed at both and you've maybe built a very valuable business.
So, each year, doubling your previous year, more than twice. But comparing the fractions to values pegged onto the first of each and every month, it’s expecting more than octuple values in less than 15 months, by January first of that calendar year.
To put those goals into explicit, concrete terms of absolute units:
Zero Month, January 1: First 100 subscriber accounts.
February 1: 120 paying subscriber accounts.
March 1: 144 paying subscriber accounts.
April 1: 173 paying subscriber accounts.
May 1: 208 paying subscriber accounts.
June 1: 250 paying subscriber accounts.
July 1: 300 paying subscriber accounts.
August 1: 360 paying subscriber accounts.
September 1: 432 paying subscriber accounts.
October 1: 518 paying subscriber accounts.
November 1: 622 paying subscriber accounts.
December 1: 746 paying paying subscriber accounts.
January 1: 895 paying subscriber accounts.
... taken to month 15:
13: 1,074 customers
14: 1,289 customers
15: 1,547 customers
But there’s a cold calculus to this way of thinking: Why should a multi-millionaire take money out of proven investments with 10% or 15% returns, since they’ll double in ten years or less?
-15 year old kid from Romania who's childhood was flash games.
Edit: Emily gave a talk on it at the IGDA Summit, but unfortunately it's only available to members.
Based on a quick calculation, to get from zero to one (billion) users takes just under six years at 7%/week growth.
Thinking anything not a grand slam is a strikeout is idotic and perverse incentives.
The allure of technology in general and silicon valley in particular is the amount of sheer wealth that you can create very quickly.
It's like an athlete saying "I want to increase my endurance" vs "I want to be am ultramarathoner".
The way you train, what you do, how you spend your time, how much time you spend, the risks you take - entirely different worlds. Wanting a billion dollar business is not remotely in the minds of 99%+ of business owners.