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How to get from idea to billion dollar company?

Discussion in 'Small Business' started by TMNT, 29th Jul, 2015.

  1. TMNT

    TMNT Well-Known Member

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    so ive had some wins and losses with small business over the years,

    and when I see businesses like tinder, uber, facebook, wotif, trivago, groupon etc. become billion dollar companies over a few years, I scratch my head thinking 'What allows them to become such success stories".

    I hae a friend who claims to have come up with the facebook idea well before it came out (obviously he didnt do anything about it which is his fault)

    That being said, I believe there are heaps of opportunities out there, and not every idea has to be an einstein idea or reinventing the wheel.

    so assuming you have a good idea, what does it take to get to the the top level??? (I have no idea!)

    I cant imagine zuckerberg putting in $10m initially to get his idea going??? I assume he started in his garage or college dorm. So what did these guys who I assume didnt have millions of dollars for staff, offices, advertising, programmers, marketing.

    eg I saw a news report today of three asian sisters who designed their new dating app/service which is supposed to be less sleazy then tinder, and they rejected a $30m startup takeover.

    Discuss please
     
  2. KDP

    KDP Well-Known Member

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    Read this article yesterday and found it interesting and relevant to the topic at hand.

    https://medium.com/@todfrancis/what...panies-look-like-at-the-series-a-e53ea8043a85

    I think you'll actually find that if it's more based on the founders rather than the particular idea. If you have the right people that funders want to back then it actually becomes the other way, ie. angel investors competing to get on board.
     
  3. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

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    There was a post about luck a little while back.

    I don't think luck plays much part at the lower to intermediate levels, but I do think it does make a big difference at these levels.
    Something as simple as crossing paths with the right person at the right time can make all the difference with these type success stories.
    There may be so many hundreds and thousands with better ideas who were better prepared, but the stars just didn't line up for them at the time and they may have fizzled away, maybe moments from success.
    You still gotta be the right type of person with the right type of attitude to be in with a chance though.

    My opinion.
     
  4. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    You should read "BOLD" by Peter Diamandis and Steven Kotler (just released).

    It's like it was written to answer your questions.
     
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  5. TMNT

    TMNT Well-Known Member

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    wow, ive gotta read it!

    when RSVP became sort of mainstream (early 2000s I believe) I had an idea for a similar but more engaging dating site, it was a bit of a combination of facebook timeline with a dating site.

    Ran it by a few peole who liked the idea. with no programmng knowledge, let alone international marketing skills, I had NFI what to do . the doubters all said, you might have a good product but who the hell is going to see your product. A TV ad might have cost $20k at 3am , while I was hoping word of mouth would spread like wildfire. But these were all laughed at by my friends.....so the idea wasnt pursued
     
  6. mrdobalina

    mrdobalina Well-Known Member

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    Ideas are a dime a dozen. It's the people and the execution that matters.
     
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  7. MRO

    MRO Well-Known Member

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    I used to work for a venture capital company. People would bring these kind of projects/ideas to us and we would spend a heap of money to try and make it work. About 1 in 5 would make a lot of money, none ever went anywhere near a billion dollar value. When i say 1 in 5, I mean the ones we invested in, this would have been 1 in 50 that were presented to us.

    Very hit and miss and and to do it properly you will have to give away a lot more than 50% of the company to someone who is willing to risk funding it.
     
    Last edited: 29th Jul, 2015
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  8. mrdobalina

    mrdobalina Well-Known Member

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  9. Be Developer

    Be Developer Property Developer Business Member

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    I have sort of been down this path, so I can explain what I know..

    Lets say, you have an idea or invent something.

    • Most ppl start with their own funds
    • Then move to friends and family for more funds
    • Then somehow ends up at Venture Capitalists desk
    • VC may help with funding or or provide platform in return of share in company (anywhere between 1% -100%)
    • If larger cash injection by VC or private investors, inventor carries on expanding with support of VC and private investors.
    • Words goes around town and value of company increase to XX millions.
    • Next stage may be IPO or buy out from maverick companies.

    Those who have done well
    Facebook, uber,air bnb, alibaba

    Our own Aussie companies
    Catch of the day, menu long,etc

    I got up at point 3, and sold out my invention... Now, you,I and everyone else in country sort of use what I ended up designing and inventing.:confused:
     
  10. KDP

    KDP Well-Known Member

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    Are you able to give more details on the invention BD?
     
  11. TMNT

    TMNT Well-Known Member

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    What sort of dollars are we talking about?

    And you had to give 50% away?

    I dont think zuckerberg did, maybe he is pure genious
     
  12. Be Developer

    Be Developer Property Developer Business Member

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    I knew this was coming.

    NDA stops me disclosing more! It was part of contract to keep quite for 15 years.

    But should be abel to disclose details after 8-9 years.
     
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  13. KDP

    KDP Well-Known Member

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    No problem. Look forward to the update in 8 years.
     
  14. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

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    Cmon man, give some clues...
     
  15. MRO

    MRO Well-Known Member

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    The inventor/originator would have to give us more than 50%. This was usually a staged process where we invested money in two or three tranches in the company based on achieving critical milestones. We would put in management to run the company to achieve this milestones and try and get the company to a level it could offer to pubic through IPO or sell to an existing listed entity. This dilutes our shareholding and the originator even further. The originator wouldnt get any cash, all was paid into the company so they indirectly go the value increase but couldnt really cash in until a later date. Even at IPO they would usually be escrowed for two years.

    Not sure how Zuckerberg did his deal but i think he got significant market (and value) before he needed more cash.
     
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  16. KDP

    KDP Well-Known Member

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    It's all a negotiation at the end of the day. I was lucky enough to have had the chance to skype with one of the founders of Air BnB and they definitely didn't give up anywhere near 50% of the company.
     
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  17. MRO

    MRO Well-Known Member

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    As @KDP said, it is all a negotiation. They better the product/concept the less they would give away.

    The venture capital model sounds harsh but at the end of the day we wouldnt make money unless the originator did. We put up millions to give it ago so needed a return. I dont ever recall any originators being upset with the outcome.

    After saying all of this, my experience is limited as i worked during the mining boom so many of our investments were in mining tenements.
     
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  18. Graeme

    Graeme Well-Known Member

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    I've got a few more points to add:
    1. A lot of the billion dollar values are based on VC's claims, and so rather inflated. The way the deals are structured is that they also have a limited downside and the first claim on any money in the event of bankruptcy or an IPO.
    2. There's been a lot of money pumped into some of these companies to get to scale. Facebook raised $1.3 billion, and GitHub has just raised $250 million. You won't know who the latter is unless you're a programmer.
    3. And as a corollary, a lot of these high-flying companies are actually losing a lot of money...
    4. Zuckerberg owns (or owned) just under 30% of Facebook. Brin and Page each own 15% of Google. They're not hanging onto majority stakes...
    5. The start-up costs for a tech firm are falling. You can rent cloud space on an as needed basis, and a lot of the development tools are free.
    As MRO said, VCs will back a bunch of ideas with the expectation that most lose money. A few will just about break even, and the hope is that one will make sufficient profit to get you ahead.
     
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  19. geoffw

    geoffw Moderator Staff Member

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    I worked in Medellin for three months as an intern programmer for a web startup company.

    The office where I worked was a co working space, where there were around 30 startups.

    There was a venture capital group which was providing the funds for these startups. They owned the building and let their startups use it for free for the first 12 months.

    It wa a U.S. Startup, and they found they could get a startup off the ground for substantially less than for a similar one on the U.S. They had offices in other cities in South America.

    Once they picked a startup, they provided capital in return for equity. This may be as little as $10k initially. They nurture the company, giving mentorship and resources.

    The standard in the industry was 5% success rate. They achieved 10% due to their mentorship. Despite that 90% dropout rate they achieved for their investors in average $5 return for every $1 invested. Costs 30% of the costs than those in the U.S. certainly helped that equation.

    The venture capital group is www.socialatomventures.com and the parent group www.socialatomgroup.com - it's interesting to see the range of startups. Some of them are already becoming very successful.
     
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  20. dontask

    dontask New Member

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    Wow, great thread.

    For those in the know, what would you do in our situation? My buddies and I (3 of us) have an idea for and enterprise software product in a growing technology segment. We have already built prototypes that work, but its only really good for demonstrating the concepts and ideas. The prototypes will not be robust enough for a commercial environment.

    Of course, being developers/technical people, we'd like to throw it all away and coding from scratch. eg: its probably easier to start again than to pay down "technical debt".

    Our current thoughts are to get the patents for our ideas in our key markets, and then try and get venture capital. Once we have a patent, there should be equity in our startup. Is this a reasonable approach?