Not at all. All of these companies have the potential to be worth billions of dollars or else we would not have funded them. Of course it's not always easy for people reading a short summary on a blog to see that potential, as you can easily verify by reading the comments on early articles about uber or Twitter.
> it's not always easy for people reading a short summary on a blog to see that potential
Very true. Today was the 7th demo day I went to with my fund partners. For each batch, we try to reverse engineer the startup list as much as possible, and we usually figure out 2/3 or 3/4 of the list before demo day. Every single time so far, when I review the list of startups before demo day and check out their websites, I think "meh, seems like this batch is a little weaker." Then I go to demo day, see the full picture on each company, and consistently feel like the current batch is the strongest one yet. It's hard to really understand a company's progress and its potential from its website, or even worse, a one- or two-line elevator pitch.
It's possible, but I think it's more that elevator pitches are often the tip of an iceberg. For example, if Uber had been part of YC, its one-line pitch might have been "limo service at the push of a button." That's not super exciting. But then I'd go to demo day, and full pitch would be: "we're starting with limos, and here's a graph of traction and retention for the last two months, and based on these trends we think we can move to using regular cars and undercutting taxis within 6 months." That's much more exciting IMO.
This assumes it was their plan from the beginning. Is that the case or did they later pivot based on new information. If the latter is the case then any company would arguably have billion dollar potential
Side-note: I realize you were using Uber as an example to make a point but actually "Limo Service at the push of a button" sounds pretty awesome on it's own.
Thank you for your response, Mr. Buchheit. I really appreciate it.
This is the answer I was looking for, one that explains your driving intentions. I'm nothing like a venture capitalist or investor, so I appreciate that I may not have any kind of good read on these companies' potentials.
I can't help but notice this article puts a lot of focus on actual revenue and margins of these companies and almost none on user number growth. At least compared to the relative focus of years past.
Is that a choice of the writer, or was it something YC companies were coordinated to focus on?
Americans spend tens of billions of dollars per year on sofas, more than they spend on mattresses. The market is tremendously big and there seems to be a gap between Ikea and $2k West Elm sofas. That's what Burrow is going after.
So they have taken both the capital costs of manufacture as well as delivery. And they have a product near the grand price point in a market saturated by Target, Amazon, Walmart, IKEA, and who knows who else.
To get a billion dollars of that market, they need to move 1e6 of their sofas--and that's assuming pure profit. How many sofas can they make a day?
I've seen several small businesses whose only function is to pick things up from Ikea and deliver. If people are comfortable buying sofas online, it will apply to a range of home furnishing items. Furniture stores have been selling "rooms" for years for this very reason.
Aside from brand and customer relationships, if the delivery infrastructure for furniture is different than other items, that will provide a moat.
Everyone in this thread is referencing Dollar Shave Club.
Can someone give a good summary of why that company made it to a big exit? What strategic moves did they make that made them succeed where countless others fail? Software doesn't automatically eat the world, after all. Why now? Why these companies? What specifically is the right plan?
Thanks for probably the most interesting business article I have seen on HN in a while!
That said, the market between sofas and razor blades is very different. I don't buy a new sofa every month. Companies don't leverage R&D and advertising the way that Proctor and Gamble did to move sofas.
The Dollar Shave Club Explanation here is optimistic at best.
At list if we look at IKEA(maybe the closest to compare to P&G) - they do have R&D(every year a new lineup, optimizing manufacturing and supply chain), and at least when they grew they did alot of advertising - and they still do some, but maybe they need less because of their strong brand an that they are considered monopolistic locally in places they reach.
But don't take the Dollar Shave Club literally, the point is more the lack of capability of companies(and their ecosystem) to move ahead, because they are deeply integrated/dependent in the past with it's old assumptions.
But now a lot of the old assumptions might be broken : no local monopolies(and monopolies over large areas are much much harder to create), no limit to product variety, much more customization becomes possible, targeting highly focused niches becomes possible, software may enable AI interior designer service for free, the supply chain looks very different for that, etc.
Burrow could get a billion dollar exit through an acquisition but its hardly going to become a sustainable concern. It's designed to sell, basically, and the idea is no more mysterious than building a furniture company that is digital first, which would be attractive to existing companies because they cannot simple change their processes over night.
