Want To Build A $1B Consumer Tech Company? Look For Long-Haul Founders And Don’t Fear Incumbents

Want To Build A $1B Consumer Company? Look For Long-Haul Founders And Don’t Fear Incumbents

JACOB MULLINS ,posted 6 hours ago

Editor’s note: Jacob Mullins is a VC at Shasta Ventures who primarily focuses on consumer web and mobile companies. Follow him on Twitter @jacob

With the recent talk about the growing “billion-dollar club” in startups, I’ve been wondering, as a Series A investor, what characteristics a $1 billion consumer tech company has. I examined the pool of consumer companies that have had exits over $100 million within the current era of consumer tech, which I consider to be post-recession 2008. I wanted to see what I could learn and ideally reverse-engineer common characteristics that would help me identify the next big winners when I see them today or in the future. I created a dataset pulling from a number of venture capital data sources, including CrunchBase, and narrowed it down to my own specifics: U.S., venture-backed companies that have had realized outcomes, both IPO and M&A, over $100 million since 2008. Because private-equity funding and M&A details are less clearly reported, this may not be a comprehensive list of consumer companies. Also, I did not include software/enterprise companies, of which there are many more.

COMMON CHARACTERISTICS OF CONSUMER TECH COMPANIES

billion-chart
Here are a few highlights:

  • 38 companies over the past five years have exited over $100 million
  • Only nine companies over the past five years have exited over $1 billion; all but one of these nine (Zappos) exited in 2011/2012
  • 29 of the 38 outcomes happened in 2011 and 2012
  • 14 of these companies exited via IPO, all in 2011 and 2012
  • seven of the nine most valuable exits were all public offerings (Zappos and Instagram are the two M&A transactions worth $1 billion or more. I’m continuing to value the Instagram acquisition at the original offer of $1 billion, not taking the decreased market value of public Facebook stock into account.)

This simple survey affirmed my belief that achieving outsized results within the consumer company landscape is incredibly difficult. Now that we’re sure it’s difficult, what insight can we glean? Read more of this post

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