How the very best companies perform

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In a day when the world is awash with talk of bubbles after Groupon and Pandora filed for their IPOs I thought it would be interesting to take step back and look at the performance of a handful of the best tech companies created since the dawn of the internet.  The growth of these companies is the best in class performance against which other startups should benchmark themselves, and it wasn’t with tiny revenues either.  eBay had the lowest first year revenues of this group at $5.7m.  The data for this chart (and more) can be found on Venture Capital Dispatch.

These growth rates are not realistically attainable for a lot of startups, and the fact that all of these companies were extremely well funded shouldn’t be forgotten, but it shows what can be done.  To give a bit more detail, any company growing at greater than 100% gets our attention (assuming the revenues are of a quantum that the growth figure is meaningful) and anything less than 50% has us asking questions.

Finally – these growth rates apply to the first years of revenues, which in the case of Google came after they had been growing the business for a number of years without revenue.

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  • Is revenue growth and size of revenue a more important metric than profit and sustainable growth? Or just another metric by which to measure a company’s performance?

  • They are all important. In the early years revenue and growth are much easier to evaluate.

  • Interesting piece, though revenue has to grow sustainably. Growth between year one and two is often a bit of a dodgy metric as year one may only include one month or week of actual revenue.

    Thought you might like some other data:

    UK Fast Growth Technology Businesses
    We run the Deloitte Fast 50 competition which looks at the fastest growing technology businesses across the UK by revenue over a five year period. (The 2011 competition kicked off this week and entries close early September http://www.deloitte.co.uk/fast50/find-out-more/

    Last year the threshold for entry into the top fifty list was 652% growth. The only year the threshold has been higher was 2009 when the threshold was 680% growth. The average (mean) percentage growth of the top fifty entrants in the Fast 50 competition was 2,321% growth over five years. The only year to top this was 2009 when the average percentage growth was 2,585%.

    You can see some more numbers here: http://thebln.com/2010/10/growth-is-never-out-of-fashion-even-in-a-recession-winners-keep-growing-fast-2/

    Revenue Growth for the largest 100 US technology companies

    This is an analysis of the top 100 technology companies in the US and when they hit $50million sales. Some of those stars took longer than you might think to get there. While there is no question that GroupOn is growing fast, there do seem to be some questions over what they call revenue. GroupOn classes the cost of a deal as revenue, though it only sees a small piece of that. http://thebln.com/2009/11/what-is-high-growth-0-50million-sales-ranking-of-us-public-tech-companies/

  • Thanks Mark. The key to a lot of these big growth percentages is a low first year. The graph in the post compares full years of revenue and as I note for all of them the first year was substantial.