11aug2002: Did an interesting
exercise this weekend: what does it take to make a billion?
Not a hyped options package, but a real asset gain of one billion pounds
based on concrete cashflows, a solid balance sheet, and non-Worldcom-flavoured
GAAP. How long and how much work does it take? Is it even possible, given
my line of work and the size of the market for stuff I dream up? It's
said that beyond the first $20m or so you're no longer in it for the money,
but the only people I've heard say this, like Elon Musk, are billionaires
themselves. For me, the sole attraction of aiming for a truly ridiculous
sum of money would be the 'unbeholden' factor. With a billion, you just
don't need to concern yourself with the issues of living securely - ever.
You are beholden to no-one, not even laws and governments: if states start
annoying you, just live on a superyacht. (Hell, live on a submarine.) It'd
bring a whole raft of other issues, of course - look at the pathetic, self-pitying
shooters and snorters many rich men have for children - but let's worry
about those some other time. Anyway, I've projected out
the spreadsheets for a new side project of Redpump
that I'm hoping to launch as a subscription-based XML web service someday,
and the numbers suggest that it'd take about ten years from launch to landing.
First, you start with the size of your market. Mine seems
to be around 200m people, and I've assumed 2% of them eventually become
my customers - with a value topping out at £200 a year. So far, so
good: it's doable. Assuming a doubling of customer numbers
each year up to the ten-year point - average, starting from a low base in
a young sector - and my own shareholding never dropping below 40%, a final
customer figure of 4m individuals gives an EBIT in 2012 of around £240m,
resulting in a marketable valuation of just over £2.2bn according
to normal acquisition accounting standards. Meaning I'd just about break
the billion mark on a liquidity event. Hard, but not impossible. So I think
I've got my next ten-year life plan. After all, it's
not about making a billion. The whole point of exercises like these is that
it's a lot of fun trying.
