The Billion Dollar Valuation Club

Aileen Lee has a really good post up on TechCrunch, in which she analyzes the number of companies that have been started since 2003 that have gone on to be worth $1bn or more.

This is a very useful exercise in the VC business since it is these big wins that produce the vast majority of returns in the business. I am not sure it is that is worthwhile exercise for entrepreneurs since you can bypass the VC business entirely, keep all or most of your company, and sell it for $20mm and have a big personal and financial success. That's another way of saying that focusing on the huge wins is something VCs do, will keep doing, and need to do, but it can be a collossal waste of time and energy for everyone else. Unless, of course, you raise money from VCs. In which case, you are getting into the game and will be impacted by it.

So, with that disclaimer, let me say a few things about Aileen's analysis and then suggest an exercise we can all participate in.

The number of tech companies started each year that go on to be worth a billion or more has been a debateable figure for as long as I have been in the business. It is an important figure for VCs and the investors in VC funds.  I have heard people say it is one or less. I have heard others say it is ten or more. I think it is at least ten, particularly if you think about this globally. Aileen calculates it as roughly four per year (39 to be exact) in the ten years since 2003.

I think it is bigger than four/year in this past ten year period. But we won't really know for another ten years. That is because the billion plus companies started in 2008, 2009, 2010, 2011, and 2012 won't all show up right away. It takes at least five years and possibly longer for some companies to develop into large and valuable companies.

It is also true that some of the companies on Aileen's list won't be worth a billion or more in a year or two. As David Hornik points out in the comments to Aileen's post, using private company valuations to do this excercise means you will count companies with inflated valuations that they won't be able to live up to.

But I think it is OK to use private company valuations as long as you come back and revisit the list from time to time, add new names, and subtract the ones that did not live up to the hype.

Finally, Aileen's list is US and Silicon Valley centric. It misses at least three of our portoflio companies and probably a bunch of others. And it has no companies outside of the US.

So I created a hackpad that we can all use to list, track, and revisit this question. It is here and I have embedded it to the end of this post. It is a public hackpad and anyone can edit it, add additional companies, add comments, etc. 

#VC & Technology