IS Management Professional turned entrepreneur. CEO and co-founder of TwoTen. And why not?
Saturday, 28 December 2013
Awesome is as awesome does
There's a thing going around that the number of companies that receive investment doesn't alter the number that go on to be "awesome companies". To quote: “The tech industry creates roughly 10 awesome companies per year... independent of...how many companies are funded"
Mike Maples, Floodgate Fund
Putting aside that this is a very Silicon Valley-centric viewpoint, it seems there's
some confusion between the term "awesome companies" and "companies that
create awesome returns within the VC fund lifecycle". They are not the
same. A truly awesome company is an IBM, a Unilever, a Honda, a Beretta;
companies that stand the test of time, continue to evolve and grow by adapting
their products to meet changing times and changing customer demands.
global tech industry almost certainly can and does produce more than 10
awesome companies a year. Some of those will not be VC funded (which
means you're unlikely to hear of them because they won't be riding the
hype wagon), some will be funded by funds that are not playing the short
term (10 years is short term, it's barely one economic cycle; Beretta
was founded in 1526), and some will take no more than a solid seed
investment round or two to become serious businesses.
are limiting the definition of awesome here to that of great monetary value, which leaves aside
awesome tech companies like Mozilla and Wikimedia, but even so it is not
important for "awesomeness" to have become a billion dollar business in less than 10 years;
this only matters to people who have invested at valuations upward of
$50m and whose investment fund is time limited.
A seed round that values
a company at a few million needs only to reach a valuation of $50m in a
reasonable time (a) to have made a serious, awesome, return for
its investors and (b) where that company has achieved growth
while being profitable (rather than following growth strategies of the "seek users at all costs"
variety), then the investors could be taking annual dividends
equivalent to their original investment value.