In the startup world there’s a common narrative that if the business is going to work, it’ll take off exponentially in a year or two from creation. Either you have crazy success right away, or it’s not happening. While that does happen on occasion, and many startup stories embellish the outliers, the reality is that it often takes longer, much longer.
Just this past week, two more unicorn stories were in the news and for each it took four years before the startup took off.
First, the startup world has been enthralled by the news that Adobe is acquiring Figma for $20 billion. At 50x the approximately $400 million of annual recurring revenue, deals like this make the venture capital industry work (extreme power laws). While Figma was founded in 2012, it wasn’t until 2016 when growth exploded. Four years of working through the details, refining product/market fit, earning those first loyal users, and still not knowing what lies ahead.
Second, this week’s Invest Like the Best show featured Trina Spear in the episode titled Billion Dollar Scrubs. Trina, the founder of publicly traded FIGS (note the random “fig” connection between the two companies), shares her story and recalls how the early years were a slow grind building a direct to consumer online scrubs business. In her words, it wasn’t until year four that growth and scale made it clear they were onto to something large.
While we all want the instant success, when it does work out, it almost always takes several years. From these anecdotal stories, and my personal experiences, four years feels like a more common length of time to know the startup is going to work and have enough traction to see a big opportunity ahead. Pace yourself, four years requires tremendous commitment and fortitude.
3 thoughts on “4 Years to Achieve Material Traction”
David, Hope all continues to go well. It’s been a long time since I’ve seen you, but wanted to say I really appreciate your weekly thoughts. Really excellent.
Thanks, Jay Allen
David based on my experience I agree that for most enterprise/B2B software startups it’s very rare to see explosive growth in the first couple of years and it’s more like 4 years to really build a differentiated product that solves customer problems really well and start scaling it
the 50X multiple looks amazing, it seams Adobe looks from Figma to grow at least 10 times its ARR?