The Break-out Year: 5 years to $1
billion
I’ve had this chart for years. I first made it back in 2004 to validate some
aggressive assumptions I was seeing in a business plan I was reviewing for
Westlake Venture Partners. The interesting fact is you can find similar
rapid revenue growth trends in most successful technology growth
companies. I recently added Cisco
Systems to the list. I had to dig hard to find their S1 filing which was filed
before the SEC was keeping digital records, and guess what, even though it’s
growth started in the late 1980’s, and they are a hardware company while all
the others here are some form of software, you’ll see the same consistent
trend.
The overall thesis here is not to say that all tech
companies can do this, but rather to say that it is achievable (perhaps not reasonable)
if a company makes the growth assumption of going from $1M to $1B in 5 years. That said, you better be really darn special
to make that claim and odds are you are not (as was the case with company
business plan that got me started on this little analysis).
As an entrepreneur you should dream big, you have to dream
big but don’t ever count on this kind of growth. This kind of growth is an outcome of stellar
planning, solid management and a special kind of luck and timing that all
Venture Capitalists would love to bottle if they could.
About the numbers
These companies all took a different number of years to
reach what I call their “Break-out Year” but from the Break-out Year the revenue
growth is very similar. What defines the
Break-out Year is growth that is massive as % of revenue over the prior year. The median growth rate here is 1300%. Google, as with many things is a success anomaly
at 8600%. I included Facebook even
though their Break-out year is below normal at 400% their overall revenue growth
is still phenomenal and they achieved over $1B in revenue in less than 5 years. Note: As a qualifier I did not consider years where
the back to back revenue was less than $1M (this eliminates the law of small
numbers, going from $50k to 700k in revenue is big growth percentage but not an
indicator of success).
Also, to be clear, the years 1 thru 5 on the chart are
not the companies first 5 years of revenue, it is their 5 consecutive years
of revenue starting with the year just prior to their Break-out Year.
