【Elephants vs Flies: Building a $100M Business】
Conventional wisdom defines ~$100M in annual revenue (or an equivalent metric depending on the business) as the coveted benchmark before a startup can consider going public. But to get there, it's crucial to first understand what type of "animals" you are hunting.
Let's look at two ends of the spectrum:
Hunting 1,000 Elephants @ 100k each
Most of the giant SaaS businesses we all know and love today such as Salesforce attribute the bulk of their revenues to a relatively handful of large corporate customers. With this class of customers, building a $100M business entails only locking in 1,000 customers at $100k each. It may sound like a sizable chunk of money, but a contract of this size amounts to pennies on the dollar for many Fortune 1000 companies.
That said, the challenge then comes when trying to navigate the long, complex, and often meandering enterprise sales cycles. Large corporates are also less likely to work with seedling startups, with untested products/services, as even minute-long outages can mean millions of dollars lost.
Hunting 10M Flies @ $10 each
In order to get 10M active users, you're probably looking at a ballpark of ~100M downloads or general users of your product/service. Obviously, factors including but not limited to churn, engagement, and conversions will impact the ultimate arithmetic, but needless to say you'd need to be catering to a hefty # of users achieve $100M in ad revenue.
This will likely entail a degree of virality and network-effects, likely driven from some sort of social element or user-generated content, which also collectively lead to strong SEO.
Both cases--and everything in between--are certainly simplistic in nature. And every company and industry has its nuances. But overall these examples provide founders a holistic, back-of-the-envelope framework that enables them to think about long-term objectives and map out the trajectory, necessary milestones, and key hires in reverse.
Image credits: Point Nine Capital
-Jun Wakabayashi
Analyst, AppWorks
AppWorks Accelerator is now accepting applications for its next AI/blockchain only batch (AW#19): http://bit.ly/2J8CAG8
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