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Learning what it takes to build a $1 billion company.
In the world of business, unicorns are a venture capitalist’s dream. Startups that are worth $1 billion or more were once exceedingly rare, but have seemingly been popping up everywhere now.
While many entrepreneurs act like unicorns are as random and impossible to predict as going viral, investors are looking for clear signs that a business has the potential to rise to the highest ranks of business valuation.
In 2015, the researchers at Shasta Ventures looked closely at the most well-known unicorn companies, unpacking the patterns they were seeing on the leadership teams, and in the companies overall.
By learning what teams have successfully created unicorns in the past, entrepreneurs can better understand what skills are necessary to create the next $1 billion company.
Here are four things I’ve learned:
1. Know how to work on a team
The vast majority of unicorn companies that Shasta Ventures looked at were not solo ventures. Only 16 percent of the companies reviewed had one founder. The vast majority had two, and slightly less than half had either three or four.
What we can see from this information is that one person alone is unlikely to do all the necessary work to create a business which has the scope and appeal to be worth a billion dollars.
Having a partner is ideal, but more than two partners may muddy the waters. A smaller percentage of unicorn companies had four founders than just one.
The takeaway: If you want to create a $1 billion company, make sure you have a business partner who shares your vision and complements your skills. But keep the initial team small, passionate, and committed.
2. Business school may not be necessary
In certain circles, it is something of a truism that if you expect to be successful in business, you need to have an MBA. Shasta Ventures found that not to be borne out by the numbers.
Just under half of the founders they studied had a BA, slightly more than a quarter had a BS, and only 16 percent had pursued an MBA.
The takeaway: Pursuing a business degree may give you connections and access to incubators that might help your business survive the early years. You might meet up with a business partner or learn more about the ins and outs of the business world there.
But if you’re waiting your brilliant idea on your MBA, don’t. Make your move now.
3. Work experience means more than degree
The vast majority of the founders surveyed had work experience in the field of IT and software before they created their companies. Other popular fields were venture capital, management consulting, and consumer electronics.
While school can be important and can teach you a lot of theory, for most people, there is no substitute for actual lived experience.
While some successful companies are started while founders are in school–Bill Gates, Steve Jobs, and Mark Zuckerberg are all classic examples–many more companies are started when people have left school, spent some time in their industry, and have the expertise necessary to identify a niche that isn’t being served.
The takeaway: Don’t feel like you have to start a company when you’re 18 years old in order to be successful. Learn about the world around you, and how to serve it, so that you can move forward with expertise and experience.
Those connections you might get in business school can also be acquired by participating in your field, blogging, being active on social media, and attending cons and events.
4. You’re in it for the long haul
If your goal for your business idea is to make a billion dollars and then flee the scene, you might want to take a moment to reconsider. As Fortune notes, some 85 percent of unicorn companies cross the mark with their founder still in place as the CEO.
It used to be that the “ideas guy” would drop out once the company became profitable, and go on to their next venture. This is no longer the case for the most profitable companies.
This shift started with Mark Zuckerberg, who managed to retain control of the board at Facebook long after the company went public, no small feat. Since he made this happen, it has become the norm for exciting businesses.
The takeaway: Turning your business idea into a billion dollar company is going to take many years of work, and a lot of time and effort. It is not for the faint of heart, and not for someone who is looking to get rich quick.
But if you have the drive to stay with your company through all the ins and outs of scaling up, you just might be able to make it happen. [Inc]