Bullish And Bearish On Building To Massive, Durable Scale
Earlier this week, right before bed, as I have a habit of doing, I posed a question on Twitter and then turned off the lights, hoping to sleep. My phone beeped a few times, and then it just went haywire. I picked it up and saw a flood of responses. I was surprised because it didn’t appear to be such an interesting question, but I guess it was one of those times when lots of really smart folks felt compelled to write, so I got up and started engaging. Here’s the tweet, and make sure to click on it to see the long conversation it ignited:
Q: Does next GOOG-scale or FB-scale tech company currently exist today? Or has this company yet to have been formed? (Pls exclude Twitter)
— Semil (@semil) October 3, 2013
The answers were revealing, and I wanted to summarize them here and offer both the bull and bear case for why certain companies *could* continue to grow and transform into the next great company at scale — by “at scale,” I mean a lasting, durable brand that will create and maintain over a $100Bn+ in enterprise or market value. That means getting to a $40Bn exit, while awesome!!, doesn’t fit the bill. Below, I’ll list the companies (in no particular order) that came up or fit the bill for $100Bn+, and also share the “bear” case and the “bull” case regarding each company’s ability to reach “massive scale” and remain an independent, durable brand (think: IBM) — let me repeat, all of these companies are amazing, so the debate is around whether they can reach the $100Bn+ scale. I also don’t know all the companies that well, so please comment with your own thoughts:
- Uber. The bears see low barriers to entry globally and questionable quality of revenue
- Twitter. The bears see it capping under $100Bn+, while the bulls do not. Great thing here is we will know in a few years what the trajectory could be.
- Dropbox. The bears are concerned Dropbox won’t make the turn from utility and selling a commodity service (storage) and turn into a platform, while the bulls believe they will and be the definitional cloud company.
- Square, and other payments companies, such as Stripe. The bears worry that a payments business requires insanely high transaction levels because the rakes are so low, or that Square and Stripe will be acquired, while the bulls see e-commerce growing like a weed and believe there will be plenty of transactions to cover the low fees in payments.
- Palantir. The bears say they’re limited by their own talent and human capital and may not be able to scale across the threshhold, while the bulls point out very few companies (like Ayasdi) can run the type of data analysis they can.
- Line (and then Whatsapp and WeChat/Tencent). The bears worry that mobile messaging will eventually have to consolidate, while bulls look at Line’s $130M+/quarter (that’s per quarter!) and believe regional dominance is enough to get to massive scale.
- Netflix. The bears feel that they were close to death two years ago though now still could be acquired, while the bulls don’t like to bet against Reed Hastings and see a new HBO-level brand + Comcast-level scale as possible.
- Alibaba. There are no bears here, all bulls as the Chinese-based e-commerce and payments conglomerate is set to go public next year and will clear well over $100Bn+ in market value, perhaps one of the most amazing companies out there relative to the attention it receives.
- Tesla. The bears admire the company but feel Google (Larry and Sergey are investors) will take them out, while the bulls believe this is one of the few companies with real technology defensibility that can be applied in sectors outside auto.
- Xiaomi. (I’m still learning about this company, so if you have thoughts, comment below, please!)
- LinkedIn. The bears believe it’s a spammy, growth-hacky site waiting to be disrupted, while the bulls believe LinkedIn’s brand is immune to unbundling and will continue to build new products and services around its massive data set.
- WorkDay. (I don’t know much about this one, so would love to learn what you think.)
- Airbnb. The bears fear the masses won’t adopt new social models around sharing and governments will regulate, while the bulls believe the economy has restructured and the younger generations would prefer to travel this way.
- SnapChat. The bears see this as a fad and/or feature of larger social/mobile behavior, while the bulls contend SnapChat’s brand and smart gimmicks around attention give it leverage at mobile scale to grow unencumbered.
I’ll write again this isn’t a comprehensive list — if you believe something should be on this, please comment below. There are some other mentions but its too early days most of those nominations. Finally, a good deal of folks believe that next special company has yet to be founded. Think about that. They may be right. It’s easy to think about what we already know, and then a little harder to posit what the future will bring — that’s why the actors and actresses on the stage are so important, because the future is unwritten: the difference between Dropbox becoming a big utility vs a mega platform for the cloud rests with the team itself, and that is exciting. But it also means that the next great artist could emerge from anywhere.