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We Also Failed to Build a Billion Dollar Company

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Re: We Also Failed to Build a Billion Dollar Company

#21

Post by wmf »

EpicEng wrote: post #20
jondubois wrote: post #17

The last article I read on HN abput this subject, the author was complaining about only achieving 20% growth per month and that it was a failure. 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…

I saw the same and just assumed the author meant monthly growth targets to reach 20% growth per year. Did they really mean 20% month over month? That's insane.

Yes, the target growth rate taught by Y Combinator is 5-7% per week or 20-30% per month (at such high rates it's better to track weekly because otherwise you could fall too far behind before realizing it). http://www.paulgraham.com/growth.html

Re: We Also Failed to Build a Billion Dollar Company

#22

Post by EpicEng »

wmf wrote: post #21
EpicEng wrote: post #20

Earlier quoted context omitted.

I saw the same and just assumed the author meant monthly growth targets to reach 20% growth per year. Did they really mean 20% month over month? That's insane.

Yes, the target growth rate taught by Y Combinator is 5-7% per week or 20-30% per month (at such high rates it's better to track weekly because otherwise you could fall too far behind before realizing it). http://www.paulgraham.com/growth.html

Wow, well... maybe it's just my ignorance, these people do this for a living. Just seems like a crazy number to me. I'm sure there's a lot of detail and reasoning behind that number.

Re: We Also Failed to Build a Billion Dollar Company

#23

Post by elbasti »

jondubois wrote: post #17

The last article I read on HN abput this subject, the author was complaining about only achieving 20% growth per month and that it was a failure. 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…

The logic is roughly as follows, for a consumer product with a short sales cycle:

- 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.

Re: We Also Failed to Build a Billion Dollar Company

#24

Post by dmix »

azhenley wrote: post #13

These articles are making me want to try to fail at building a billion dollar company. P.S. Kongregate gave me one of my first tastes of passive income. Thank you!

I'm guessing they have some sort of ad revenue sharing model? What type of income did you make?

Re: We Also Failed to Build a Billion Dollar Company

#25

Post by Mitchhhs »

xiphias2 wrote: post #8

I believe the solution is to be informed. 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 eas…

Its not always being just informed. Its the difference between knowledge and wisdom. You may know all these things up front and make the same decision to take VC because of other factors, prestige, the easy money, thinking you will be the billion dollar company. Then things don't go as planned, the rubber meets the road, and the cool sound of telling people you raised VC wears off. Then you realize why all of these articles are written and write one yourself.

Re: We Also Failed to Build a Billion Dollar Company

#26

Post by wmf »

EpicEng wrote: post #22
wmf wrote: post #21

Earlier quoted context omitted.

Yes, the target growth rate taught by Y Combinator is 5-7% per week or 20-30% per month (at such high rates it's better to track weekly because otherwise you could fall too far behind before realizing it). http://www.paulgraham.com/growth.html

Wow, well... maybe it's just my ignorance, these people do this for a living. Just seems like a crazy number to me. I'm sure there's a lot of detail and reasoning behind that number.

Running a successful startup is crazy and unnatural; that's why it's so rare and that's also why there's backlash against that becoming the default mode of thinking.

Based on a quick calculation, to get from zero to one (billion) users takes just under six years at 7%/week growth.

Re: We Also Failed to Build a Billion Dollar Company

#27

Post by ikeboy »

wmf wrote: post #26
EpicEng wrote: post #22

Earlier quoted context omitted.

Wow, well... maybe it's just my ignorance, these people do this for a living. Just seems like a crazy number to me. I'm sure there's a lot of detail and reasoning behind that number.

Running a successful startup is crazy and unnatural; that's why it's so rare and that's also why there's backlash against that becoming the default mode of thinking. Based on a quick calculation, to get from zero to one (billion) users takes just under six years at 7%/week growth.

Starting from 0 it takes infinity years regardless of growth rate.

Re: We Also Failed to Build a Billion Dollar Company

#28

Post by azhenley »

dmix wrote: post #24
azhenley wrote: post #13

These articles are making me want to try to fail at building a billion dollar company. P.S. Kongregate gave me one of my first tastes of passive income. Thank you!

I'm guessing they have some sort of ad revenue sharing model? What type of income did you make?

They do ad revenue sharing and microtransactions.

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.

Re: We Also Failed to Build a Billion Dollar Company

#29

Post by ecksponential »

EpicEng wrote: post #20
jondubois wrote: post #17

The last article I read on HN abput this subject, the author was complaining about only achieving 20% growth per month and that it was a failure. 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…

I saw the same and just assumed the author meant monthly growth targets to reach 20% growth per year. Did they really mean 20% month over month? That's insane.

It basically means doubling at least every five months, each five months, right?

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?

Re: We Also Failed to Build a Billion Dollar Company

#30

Post by jim-greer »

Mitchhhs wrote: post #25
xiphias2 wrote: post #8

I believe the solution is to be informed. 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 eas…

Its not always being just informed. Its the difference between knowledge and wisdom. You may know all these things up front and make the same decision to take VC because of other factors, prestige, the easy money, thinking you will be the billion dollar company. Then things don't go as planned, the rubber meets the road, and the cool sound of telling people you raised VC wears off. Then you realize why all of these a…

Well put.
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