People who are not diving deep into the topic of startups and the venture industry usually admire it, having heard a lot of fairy tales from a random guy who invested 10 dollars, and a company with a capitalization of a billion turned out, so then this random guy became rich. Indeed yet another sugar story!
Ok, let’s skip the numbers of the very minimal probability of creating such a company, and the time you need to understand what to do and the efforts you must invest in, and look to dry figures and financial statistics of the estimates of how much money you need to invest in order to get such a big business.
The romance of big earnings is gone, leaving only the absence of a fairy tale. The unicorn ride the rainbow and flew off to the destination unknown.
From The Crunchbase Unicorn Board, based on more than 1450 existing companies with a valuation above a billion dollars you can make a conclusion that to get a combined capitalization of 4.9 trillion dollars, investors invested 850 billion. It means that every dollar invested in the fastest growing companies in the world brought almost 5 dollars in profit. Investing 1 dollar – get 5 dollars is fair enough a good strategy.
With an average time to reach a billion in 7 years (and for multi-billion, it is 10+ years), this is somewhere between 18-28% per annum. That’s good! It a much better than a deposit in a bank! That’s really good, but it’s far away not an x1000. Those. So now you understand the average unicorn is when you take $180 million and wait 7 years. If you want 10 yards, you need to invest a billion and a half. Stock up on patience my friends!
As in any business, by investing a dollar, you can earn a billion only if a rich guy with billions is waiting for you somewhere around the corner. For startups it means such a guy ready to invest for a share. In real business – ready to grant you a loan for contracts or construction of plant or factory.
It turns out that there are no miracles at all. To get super profitability is not about how to make 1000% per annum on your dollar, but to take someone else’s million, earn 10 million in a year, and have x100000 for your invested dollar.
The trick here is it’s not enough simply your dollar – you have to bring added value on top of it. Moreover, they need to see your potential to invest next to your dollar.
