The only two ways to build a $100m business

&#62; Too often I have seen entrepreneurs believe that customers will automatically flock to their cool new service, completely underestimating how tough it is to cut through the noise and build an audience.<p>I usually think the opposite. Most of the time when I come up with an idea for a start-up I think "How the <i>hell</i> am I going to get users on this thing?"

I could be missing something but I find this article a little ridiculous and devoid of any useful information.<p>I work for Atlassian. It's a $100M business. It wouldn't fall into either category. We've gotten there by selling a lot of software over the internet. We spend hardly anything on customer acquisition. There is no viral effect to our products.<p>Another successful business I can think of off the top of my head is ZenDesk. They have to be approaching $100M. Their main sales channel is the internet (low customer acquisition). They have zero viral effect. You either have X support staff or you don't therefore you will need an X-user ZenDesk license.

I should just mention that there’s yet another way to build a $100M company, but it involves starting with a $1B company.

So $100M is the new $50M? I used to hear VCs talk about "We don't want to invest in something that isn't going to be at least a $50M business."<p>The other question is this, "Valuation or revenue?" If I can build a business with $30M/yr in revenue and 16% net income I shouldn't bother talking to a VC? I don't know, seems like you leave too much money on the table with this world view of $100M or nothing.

"Generally speaking, there are two ways (and only two ways) to scale a business to hit that $100 million threshold."<p>Actually, there's another way to hit &#62;= $100M.<p>Be a strategic acquisition target. (Route two: The viral effect can overlap with this.)<p>I forget who blogged this (Dixon?), but the idea is that that to hit a &#62;= $100M valuation, you should not be thinking of the standalone value of your business, but instead the value it provides to potential acquirers.<p>Sitting on crucial patents is one approach, but extraordinarily tricky.<p>More importantly, if your existence presents a strategic challenge to a larger player (e.g. Instagram), then your business is worth a lot of money.

I'm more inclined to build a stable business that makes me enough passive income to continue to work on it. Building a $100M company sounds exhausting. 37signals has definitely influenced me in going in the direction of small and lean instead of big and greedy. However, I find the insight into the way VCs think fascinating.

I know this is HN and we can assume certain things about the businesses being profile but I wish that the headlines reflect the narrow niche the articles talk about. There are certainly other ways to grow a business outside of the software/online space.

In consumer space sure, but not in B2B or enterprise.

I'm surprised he doesn't mention TAM (total addressable market) at all. A high LTV doesn't matter if you're just selling things to <i>male cat breeders in the Northwest between the ages of 27 and 33</i>.<p>For the high LTV option, can one put a specific number on this (i.e. $1,000)? Or is it simply having the ratio of LTV to Acquisition Cost is greater than X?

Are these two ways really that different?<p>Essentially all the article states is that a profitable business needs to have profits per user that scale according the cost per user acquisition. Viral is cheap acquisition, so profits can be less. Non-viral costs more per user and typically has a smaller market, so profits per user need to scale accordingly.

Wow, this doesn't cover models that have worked for companies like Microsoft or Apple. Were they viral, or did they depend on big LTV? Not completely. LTV helps (people buying iPhone again and again), but they are not subscription-based companies. I think this model falls short to describe business.

As he mentions in passing, marketplaces seem to be a good solution to both of these options. Once you reach a critical mass you potentially have a large viral effect, user lock-in, and a high lifetime value as users get used to purchasing on a regular basis.<p>The only trick is conquering that chicken-and-egg issue.

Or number 3, leave the boring B2C world and go enterprise

Anything that claims there are only X ways of doing something will always have somebody come along and +1 it with a new approach.<p>I'd also say that anybody setting out to make a 100m company is somebody who has already made a sucessful company already. But software is the new music thesedays as how whats the most a single application has sold for compared to what the best single song has made and I'm thinking Instagram even compared to tbe beatles on a app compared to one of there great songs will still win.<p>I will also correct the title for programmers and say: "There are only 10 ways to build a $100m business, FF if you include exceptions"

"Error establishing a database connection"

Let me summarize. The 2 methods.<p>1. Have customers who come back frequently and spend money. 2. Have a lot of new customers who spend money. They tell there friends to come, and spend money. Rinse. Repeat.

Interesting article and insights. I'm wondering if there's a hybrid model where you can enjoy both - high LTV AND high viral co-efficient. Or if that's unrealistic. Maybe Ebay?

what about having a 5 million/yr revenue run rate. With "valuation" multiples of 20s, you can get to a value of $100 million.

more broadly, i've often said that there are two ways to build a massively successful business (e.g. $100m business, or one worth a billion or billions):<p>1. don't fail.<p>2. don't fail to massively succeed.<p>bootstrapping is all about completing mission number one. not going bankrupt. not falling apart. not having a bubble pop from under you when you need it for your business plan.<p>but people all too often forget about #2, and think they will just magically be a $100m company. It doesn't work like that. If you want to be a $100m company, do two things: don't fail; don't fail to be a $100m company.<p>this is genuine advice and I can give more details if anyone is unclear about anything.