1. The quickest path to $50m in revenue? Build fun.

    The Wall Street Journal has a good piece, based on Christian Chabot’s blog post, about how long it takes to build a technology empire.

    Turns out it takes an average of eight years to hit $50m in revenue, which is about the point when you can start thinking about things like going public. And this is for the top 100 largest software companies, so we’re talking about the biggest winners here. One of the most valuable companies ever founded, in any industry, in any country, took 8 years to hit $50m in sales, Microsoft. Oracle took 10. Locally I often point to the timelines of successes like iRobot and Harmonix and the time it took them.

    But hey, let’s say you’re still trying to hit the obviously unrealistic five year projections  of a typical venture capitalist (unrealistic only from a purely factual, statistical basis you understand), what’s the fastest way to the top?

    Thankfully Tableau’s study breaks down the companies by market segment… so I did a little extra simple math. Here were the averages for how long it took to hit $50m in revenue by market segment:

    Network (Rackspace, Echelon): 10.6 years
    Security (Symantec, Sourcefire): 8.2 years
    Database (Netezza, Oracle): 8 years
    Content Management (Adobe, Digital River): 7.5 years
    Entertainment (Activision, EA): 6 years

    Feeling impatient? Don’t start a networking company, start a gaming company. Of course, this is a limited study and breaks with our deep-seeded need to be working on “serious stuff.” But it’s actually not just historical, it seems to be repeating itself right now. At least three Social Gaming companies founded post 2007 will be, or already have, hit $50m in revenue in their first three years of business.

    The interesting dichotomy that the data suggests is this: it will take longer than you expect to hit success, and building fun might actually accelerate that path.

    Graph of top 7 public entertainment gaming companies revenue

  2. Building platform companies

    RIM recently paid $8.3M to buy the once highly buzz-worthy Dash Navigation. Dash was a GPS-masquerading-as-in-car-software-platform company. And, you know, there is no better way to instantly sound bigger than to say, “we’re a platform for…”

    I personally loved the Dash as a product, but just was never quite sure about the whole platform focus. There are two problems with the “platform” approach, one is that platforms are hard - you need to both create a killer product and convince others to build killer products for you. The second is that the tactic is often more about ego and makes your life harder for little benefit, no matter how instantly sexy and “big” a new platform sounds.

    Dash Navigation could have built on a pre-existing platform, as Stacey over at GigaOm points out. Slacker radio (which I love) and Kindle have similar issues. Do their separate devices warrant an entirely new platform or is being on the iPhone/Android/etc close enough?

    We went through this several times at Ambient Devices, where we got regular questions about whether we should just be embedded in cell phones and laptops - a tack that our major competitor Microsoft Spot took before they ultimately died. Despite the ill fate of Spot as part of another platform, which I chalk up to execution, I’m still not sure the separate device (new platform) was the right answer.

    Over in social gaming land, I was talking with James Currier last week and he made an empassioned point about building inside of existing social networks. Why build a new platform from scratch when your customers are already coming back to Facebook (retention), already have their friends there (acquisition), and spend more time there (engagement).

    Is your idea really worth trying to be one of the 10 URLs an average person visits in a day? Is your idea really worth being one of the three devices an average person purchases in a year? If not that doesn’t mean it is a bad idea, most $100m+ revenue companies do so without creating a platform - it just means you need to look for the best ecosystem to exist in.