How do you grow a company really, really big? I read this great article called “The Surest Way To Build A Billion-Dollar Internet Company”, by James Slavet, partner at venture capital firm Greylock. Slavet brings up the few companies (Amazon, Yahoo, Skype, Dropbox and others) that actually crossed the magical line of having a billion dollar valuation in the US and tries to deduct some key components on why these companies succeeded. His conclusion from looking at the companies reads:
the best way to create a consumer Internet company worth north of a billion dollars is to build a digital transaction business – a company that connects buyers and sellers so they can more efficiently transact.
This got me thinking.
The better part of the companies in the article fit under that description in one way or another. But is this what they set out to do in the first place or when did they find their path?
Paypal was originally two companies called Confinity and X.com. They were both in the financial space trying to solve email payments and beamed transactions between palm pilots, which were pretty much the iphone of that era. After a successful merger they founded Paypal. Thanks to Ebay, Paypal managed to grow a substantial loyal user base that even put Ebay’s built in payment service (“ebay payments”) out of business. Eventually Ebay acquired Paypal and the rest is history.
So what about Ebay?
In 1995 Programmer Pierre Omidyar built “AuctionWeb” as a part of his personal website. In 1996, they made a licensing deal with Electronic Travel Auction to sell plane tickets. The service grew phenomenally well and ran 2 million auctions in 1997. The company, changed it name to Ebay, raised some money and took the company public in 1998.
Among the more recent examples we find Dropbox and AirBnB, both yCombinator graduates.
Dropbox was founded by MIT student Drew Houston for his personal use. He then went through the yCombinator program with a bit of seed funding and launched at the Techcrunch50 conference. The service grew rapidly due to some clever viral features, like sharing folders with people that are not yet subscribers and getting more space by inviting friends and connecting more devices.
An then there was AirBnB. Brian Chesky and Joe Gebbia had a problem. They couldn’t afford expensive hotels when visiting conferences. As a way to make money and help out people visiting San Fransisco for conferences, they rented out air mattresses in their livingroom. As a bonus the founders launched a special brand of breakfast cereal which was a part of the Airbnb experience. The founders joined the yCombinator program and got famous for the concept of “growth hacking”, getting a lot of users from the Craigslist house rental section. The services grew and now, AirBnB has a global presence with a billion dollar valuation.
That’s it. Four companies that tweaked their path to grow where the clients appear.