Add a Zero

All Things Venture #099 (dayyyum I am close)

I was reading through a pitch today and there was one particular comment on a slide that struck a chord with me. The company was describing it’s lifecycle as a series of Acts. You know like, Act 1, Act 2, Act 3. And in Act 3, clear as day, simple as Bobby Boucher was an absolutely audacious goal:

$10 billion of additional ARR

$10 billion of ARR? $10 billion of ARR is a crazy amount of money. There are 30M+ businesses in the US, less than 0.01% produce more than $10 billion of revenue a year. The likelihood that any company reaches that sort of revenue milestone is about as likely as Dave Chapelle not being funny. In all likelihood, getting to $10 billion of ARR is unlikely to happen, nonetheless here we are. I’m writing about that goal and you’re reading about that goal because it stuck with me.

And the reason why it stuck with me is becasue my gut reaction upon seeing that on paper wasn’t, “wow that’s crazy,” my gut reaction was an undeniable “YES. This team gets it.” Venture Capital operates along a power law, 1% of the assets are going to produce 99% of the returns. You can be in loser, after loser, after loser, but if you find and invest in a Roblox (a $22bn business), in a Shopify (a $86bn business), in a Google (a $2tn business), nothing else matters. You get a completely new lease on life, you look like a genius, and the whole game gets easier.

I share all of this because in my day to day, I consistently observe the gap between how investors approach venture capital as a profession, and how founders approach venture capital as a mechanism for funding.

Investors live their lives as a series of probability weighted outcomes. We string together grand visions for the future and ask ourselves, “if this set of successive miracles occurs, how much money can I make for my firm and for myself?” Conversely, founders live their lives in a perpetual state of frustration and impatience. The consistent refrain is, “the way we do things today sucks and is stupid, so I’m going to solve it.”

And you know what?

Living in the latter is objectively goood!!!!! We (as a society) need more BUILDERS. We need more dedicated, passionate, unwavering DOERS fixing the asinine ways we do so many things. We need more people who, through sheer will, righteous indignation, and personal resolve, are willing to reach forward into the future (at great personal cost) to fundamentally make a dent in the arc of the universe.

And the dirty little secret that enables you, me, or anyone an opportunity to make a dent, to take a big swing is simple: just add a zero.

If you are a founder, or an aspiring founder, no problem, literally none, is worth your time unless you see a pathway to $10 billion dollars. Think that you could get to $1 million in a year? Nope. Up the ante and the stakes, chart a path to $10 million. Think that in a great outcome you could get to 6% market share? Wrong. Ask yourself what will it take to get to 60% share. TAM is capped out a conservative $30 billion? Yeah, nope see ya. Find one that’s worth $300 billion.

It sounds silly when you say it out loud, and it sounds a ton like Justin Timberlake cum Sean Parker in the Social Network, but that’s the point. Venture Capital is by default a game of outliers, so think of as and set yourself up to be exactly that: an outlier.

Venture Capital is a maddening, exceedingly difficult investment strategy & asset class but when it works, good lord it works, and it tends to only work when you are swinging very big, and swinging very hard.

I guess to tie it all together my point is this: think bigger. The entire ecosystem of venture capital is oriented toward achieving something that is once in a generation. Only a handful of companies started each year truly matter, and have any sort of chance of becoming an enduring company. Be one of those companies. Swing for the absolute fences, and when in doubt: just add a zero. :)

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A few examples of Venture Capital working like an absolute dream:

• Benchmark invested $7M into eBay for a $4Bn return¹

• TVI invested $1M into Microsoft for 5% of the company²

• Blackbird’s initial investment in Canva is rumored to have returned 2600x³

• Union Square invested ~$4M/$5M in Coinbase’s Series A and probably returned $2bn+ from this initial check

1.

2. https://techcrunch.com/2014/06/14/sand-hill-roads-consiglieres-august-capital/

3. https://www.afr.com/technology/blackbird-nets-800m-payday-from-canva-share-sale-20240405-p5fhq5