Yep. I wrote a piece for TechCrunch about this recently. There are a bunch of "Invisible Unicorns" in the startup world that have built businesses brick by brick, often without capital to start. They often have a compound interest like effect, the $1M business grows year after year and all of a sudden you have MailChimp, with a $400M ARR, which is completely controlled by its founders. Or Shutterstock, which went from bootstraps to a $2B market cap (and $1B for the founder alone).

These stories are often kind of boring. Who wants to build (or read about) a CRM for life sciences companies? Fortunately for Veeva shareholders, there was a founder who wanted to go after this $6B opportunity.

Or Guidewire Software, which powers insurer's ability to underwrite and turned a modest $29M in VC into a near $3B business.

In my post, I found 15 companies that I categorized under the heading "Blessed are the Boring." These are companies that build software to automation injection molding quotations, construction management, corporate event messaging, and have done quite well as a result.

https://techcrunch.com/2017/07/01/invisible-unicorns-35-big-...

It would be good if more startups studied their examples, rather than reading yet another profile on Elon Musk or Jack Dorsey.

> These stories are often kind of boring.

Definitely not. Boring is subjective but people who can't understand this kind of success have no business being in business.

I bookmarked your post

Thanks, I have a revised version coming to Medium soon, turns out I missed ~20 pretty impressive companies!

I'm not really in the tech scene but often wondered just this; Are there really a lot of entrepreneurs with a genuine goal of creating a 1B company? From the venture capitalists perspective of course that makes sense but most engineers I know really just want to design products and have control over the direction of the company. Seems much easier if your content with a 25m (or even less depending on how many partners) company.

I mean I can understand you need a 1B company if your going to be building rockets or autonomous cars but I would imagine this doesn't apply to 99% of founders.

My goal, and it seems infinitely challenging, is to make enough from my software to pay my bills. I do not have billion dollar bills.

Solving big problems and creating big companies is really exciting for some entrepreneurs. For that you need VC's and so now your implicit goal is $1B.

> turn into a monopoly

Sure, but how do you do that? There's lots of textbook stuff (patents/copyright/trademark, consumer habit etc), but in practice, you must continuously improve it, promote it etc, to keep that "monopoly".

There's no monopoly; only temporary monopoly. [But I'm interested to hear your thoughts]

The more complex the solution, the easier it is to lock it in permanently. People don't want to learn a new complex thing. Note that this means the minimal complexity (or close to it). If you implement something that could be simple, and you make it complex, someone else will come along and make it simple and kick your ass at market.

Imagine you've got a warehouse automation system (this is not an example of a $25 million dollar business, just an example of a problem that has no simple solutions) that is ten times as efficient for employees as the current pad-and-paper solution. If you arrive first and lock in that industry with the market leaders in owning warehouses, you don't have to worry about a competitor coming along five years later with a system that is eleven times more efficient than pad-and-paper and that costs 20% less than your system. It cost the company a half a million dollars to train all of their staff to use your system. It'd be crazy to migrate.

So...not a monopoly, but a comfortable lock on a significant portion of the market.

You do know that there are thousands of companies in the warehouse automation space, right? And that "pad and paper" (whatever broad brush that is supposed to mean) isn't really used anymore for anything but small warehouses that wouldn't be a profitable target for warehouse automation software? And that there aren't any "market leaders" that own most of the warehouses...you'd have to lock up thousands of the biggest companies even before you got to 10% market share?

I understand the point you're trying to make, but that was a terrible example. Even then, I don't agree with the answer. Complexity isn't a deterrent to market, otherwise some company would have locked up international import/export by now. The market's response to complexity isn't typically a monopoly but rather very fragmented hyperspecialization (which is the case for both international import/export and warehouse automation).

What people are suggesting here is very well studied in economics: it's called a natural monopoly. And suggesting that you just focus on building a natural monopoly is about as facile as suggesting you just become a billionaire. Building a natural monopoly takes a mountain of time, money, and expertise. It's way harder to build a natural monopoly than it is to build a $1B business that has to compete.

It was a hypothetical example. I know nothing about warehouse automation (though I know it is not using pad-and-paper as I assumed any intelligent reader would understand I was making up a hypothetical world where warehouse automation didn't exist yet), but I know it's complex and I know that if a company with a lot of employees trains them in a complex system, the odds of them changing that system are very low.

And, as I said above: It's not a monopoly. But, it is a comfortable place to exist profitably without a lot of risk of losing your customers.

Also, you've wholly missed my point about complexity. Some problems are hard because of external, uncontrollable, unpredictable, complexity. Import/export is that kind of complexity. I'm talking about predictable complexity. Again, to come back to warehouse automation as an example, which you hate, but makes my point. A warehouse has a lot of moving parts (people, machines, inventory, shelves, whatever TF), but it is finite and is a mostly closed system. The inputs and outputs usually match up, and you can predict what's going to happen with ins/outs and all the people and things that make the things move in and out. It is complex because it is large and there are a lot of people involved and many of them would need to be trained to use any new system that automates it. It is not, however, chaotic, and involving many competing factions, like import/export.

Unpacking that a bit, training costs are to do with interface complexity (in the sense of "necessary" complexity) due to integration with other systems, and other information. i.e. it's not 100% automated; you can't just press a button. It's more "amplification", where you must be trained and practised to use it effectively - a tool for skilled labour. If you're super-successful, yours becomes a de facto standard, which others copy (usually, you still command a premium; but for the life-style idea here, we'd want to avoid that).

This might be included as "installation" costs, along with and engineering integration with other information systems, Related is the organizational purchasing process, expensive for larger transactions: determining requirements, evaluating alternative vendors and solutions, sign-off from legal and upper management, and so on. Change itself is disruptive, there'll be teething problems, other systems will have to adapt, and other knock-on effects apart from training itself. These are one-off costs that you'd prefer not to incur again, unless there's a very large benefit (your example of 10x is worth it, but not (11/10)x).

All are switching costs.

Within that "fragmented hyperspecialization", might there not be good examples of the psuedo-monopoly ("comfortable lock") of the type SwellJoe describes?

You will most likely need to work on maintaining your monopoly, but having a monopoly position in a small market allows you to extract above average profits without attracting competition. This is the path to quiet success.

From a lifestyle perspective it is much better to be a small fish in a small pond than a big fish in big pond filled with sharks.

This is my kind of strategy. If you could get one you'd be just fine. If you get two you've now developed a skill out of it. Sky is the limit from there. And you can walk down the street freely.

You have to match development with domain experts. Development has to take time away from domain experts until you can pay them and not everyone is willing to be a free part of a development lifecycle.

Finding anything more than vague ideas requires connections and the other person not knowing the value of being able to describe their problem (otherwise, why wouldn't they just learn programming and build something themselves?).

Good point - finding domain expertise for product/market fit is super important.

However, that's not something that is solved purely by capital. It also takes a lot of time (in practice, you need potential customers to describe their problem multiple times over multiple meetings, since what they think they want, what you think they want, and what really solves the problem take time to converge). For our company (applying ML/NLP in the customer feedback domain), finding domain experts willing to contribute their guidance took a while, but has been one of the most important things we've done.

You can shovel developers and PMs and QA at the problem, but if it's a greenfield project, (IMO) you're more likely to have people stepping on toes and vying for territory which can be fatal to a startup. Even if they don't fall to that, time/quality/money is the usual trade-off trifecta, but as long as it solves the problem, extra quality may not necessarily matter. That's where you get into laying out MVPs and getting your customers to agree to buy that MVP and what bells-and-whistles they can live without for a first product.

Customers absolutely need iterations to think things through. In fact, that's my default approach now because trying to get everything right for the first meeting is extremely unlikely. Capital does buy you time and iterations.

I like this point - going for an arbitrary number like 1 billion is ridiculous. But I'd like to add if you have a $25 million company, you probably have the resources and the smarts to grow into other related spaces. You might be worth 1 billion in 30 years assuming a 15% growth rate. Not entirely unachieveable, but you will be kind of old.