View Comments
12th Jul 10
Jonathan Cavell
That’s what $1 Billion Looks Like. Now, How to See it in a Company?
I’m currently reading a book about the origins of Facebook (look for a review of it on this blog in the next couple weeks). It lays out some of the offers and financing that the company received as it grew. The fact that Facebook was a $100M company less than a year after it debuted in Harvard is very compelling. In hindsight, it is pretty clear that this kind of growth could only be driven by scratching an itch that others had missed. The logical question I began asking myself was, how could/should we have seen that Facebook was going to change the world?
My theoretical response to this question comes in two parts, first you need to look at the way people are using the internet and identify some of the obvious next steps. Looking back to 2003, I would say there were at least two of these obvious next steps. First, people would begin using the internet for personal email more (most people only had their school or work account). Second, people would all have their own website. I think these were pretty widely understood truths and, smelling potential profits, companies hurled themselves at them. The first problem got solutions from Hotmail, Gmail, Yahoo! Mail and ISPs. The second problem got solutions from Macromedia and Microsoft (Front Page).
The first problem got solved quickly, soon Hotmail and Gmail had exploded. AOL opened up everyone’s old email addresses (I actually still have access to my Jonyisgood@AOL.com email, not that I ever check it) and everyone who wanted personal email had it. The second problem, faced much stiffer odds. I remember that in my college, they tried to teach everyone how to use Dreamweaver to create their own webpage. The results were disastrous. I’m pretty crappy at design and I can tell you that mine personally, was never going to be my face for the web. It wasn’t the worst one though, and it was distanced from the worst ones by a long shot. One thing was clear, too small a part of the world at the time had the knowledge and skill to create attractive websites. Another problem facing this concept of the individual website was how to let others know that it existed and tell them when it was updated. Most of these websites at my school got created for class and never touched again (not by the author or visitors). There was no central catalog of all my friends’ websites and no standard way to read them quickly.
These difficulties made this second problem one with the potential to spawn a billion dollar company or two. Why? There was an obvious, logical truth about where the Internet needed to go and it was suffering from serious road blocks. The rapid incremental innovations that were being applied to DreamWeaver and FrontPage were not enough to help/motivate people to go build their new sites (they only partly solved the need to know HTML and they didn’t solve the linking/updating/directory problem at all). What the world needed was a disruptive innovation that solved the problems and made the obvious truth of personal websites a reality.
Friendster then MySpace then Facebook solved these problems with the disruptive innovation of a single website that allowed everyone to build their own page and neatly keep track of their friends. While they (especially Facebook) have done much more since, the reason they grew in to giants was this concept. My theory is that this shouldn’t have been surprising since there was a logical truth to what was coming next and they provided a solution.
One other thing that I think is critical to note in this space is that identifying billion dollar companies requires first looking at the truth you think will drive disruptive innovation then looking at EVERY new company through that lens. If you were an investor who had identified personal webpages as one of those truths, you might have been rummaging through “web design tools” and not taken notice of this new University-Based service for keeping track of friends. However, if you had taken the time to look closely you would have seen exactly the innovation you were looking for.
So that leads to the next logical question, what are the obvious, logical truths that are suffering from major road blocks? I’m going to come back to this topic, but I’d love to see some thoughts in the comments.
