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The Formula Startups Use to Make Billions (Infographic)

BY CATHERINE CLIFFORD | April 11, 2014|

The Formula Startups Use to Make Billions (Infographic)

From thousands of miles away, Silicon Valley can feel like a magic box: normal people enter and out pop billionaires. But the startup ecosystem is much like the Wizard of Oz, where, when you pull back the green curtain, there stands a man.

There’s actually a fairly systematic process behind the formation, growth and financial success of many startups. Which is not to say that it is a fool’s errand to launch a successful startup and grow it into a billion-dollar company, but only to say that it has been done, and there is a worn path and a mature ecosystem surrounding this routine.

Related: How This CEO Combined a For-Profit and Nonprofit and Made Both Better For It

San Francisco-based startup organization Funders and Founders generated the infographic below, breaking down the way an entrepreneur goes from idea generation through to initial public offering. The infographic is based loosely based on famous programmer and venture capitalist Paul Graham's essay "How to Start a Startup.”

Take a look to get a clearer picture of what goes on in the big black box that is Silicon Valley. Behind the green curtain.

Click to Enlarge+

Related: This Billionaire Just Gave 10 Startups $100,000 Each on a Whim

Catherine Clifford

Catherine Clifford is a senior writer at Entrepreneur.com.

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183 Comments

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La Tesorito from Facebook5 hours ago

sounds easy.. it does not describe all the work behind, however it just give the title for each activity to do and re-do in case it fails.... it should be like cycle.

Mario Villarreal from Facebook5 hours ago

Daniel Byrd

Yasser El-Hadari from Facebook8 hours ago

Hatem Sherin

ArmaghanRehmanKhattak9 hours ago

So Easy rite?

Kevin Lopes from Facebook12 hours ago

Miguel Hermosilla Rodrigues tem de se ter o dinheiro para comprar a ideia. Mas essa parte eles não dizem.

Kailash A Rao from Facebook12 hours ago

Rahul Reddy

Freddy Vaca from Facebook15 hours ago

So SIMPLE yet SO many over complicate....

philipmasiello16 hours ago

i find this to be irresponsible ad an over simplification. Its garbage. I wish it were that easy.

Royce Castillo from Facebook16 hours ago

Troy Lapuz

Omer Saleem Bhatti from Facebook16 hours ago

would sure do Faizan.. thanx :)

Faizan Ijaz from Facebook17 hours ago

Omer Saleem Bhatti, this can be quite helpful for your entrepreneurial journey. Must check it out if already have not.

Desu Khan from Facebook17 hours ago

https://www.indiegogo.com/projects/pride-k-9-security-and-personal-protection/x/7327232

Anthony William Shannon from Facebook17 hours ago

Over simplified.Graph

Sam Zand from Facebook17 hours ago

wow... they make it so simple and easy. anyone could try it. good luck. ;0)

vishal vivek17 hours ago

You have oversimplified the scenario!

Oana Stan from Facebook17 hours ago

looks so easy:)) is not

Bakhodir Jakooboff from Facebook17 hours ago

I did valuation similar to this for my last MBA class...result gave awesome IRR 33%, but in real life there is much more obstacle than just following a pattern!

Reid Ballinger from Facebook17 hours ago

Garrett Berman Bryan Phelps

Chris Giraud from Facebook18 hours ago

Hassan Siddiqui

Shane Furlong from Facebook18 hours ago

Thomas Hyland

Bryan Ziegler from Facebook18 hours ago

So stupid

247pressreleaseApr 17, 2014

An interesting visual that is great for the novice to understand from A - Z the process of what it takes. Definitely some interesting comments about how certain phases may or may not be handled, however as an overall insight, it is a great visual.

Yes, there are many holes that would need to be filled in, but as a 'general' overview from 1 mile up, it works for many.

Michael

24-7 Press Release Newswire

uniartsdesign2014Apr 15, 2014

I agree to some of you've mention above. But sometimes, you need not to have an investor or co founder because if you are to start business, you must try it first by your own. Any way, thanks for sharing your information. =)

DaquanOliverApr 15, 2014

Parts of the infographic are right on target, but there are a few questionable points. The 50/50 co-founder split model is a flawed one. The vested percentages deserve much more emphasis. The same usually goes for approaching investors. Too much emphasis is placed upon receiving investing these days. What's more important is that you gain the pre-orders and execute the model with a proven business model and satisfied customers. An investor at that stage might be nice, but more than likely an unnecessary allocation of time and resources.

Also, no real implications for service based companies either.

QouphyApr 15, 2014

If you are your co-founder split company ownership percentage 50% each where is the 10% for the investor going to come from? This is simple mathematics 50% + 50% = 100%; unless you are using mathematics made in Mars

KevinApr 15, 2014

@Qouphy The 10% comes from the total 100%, both founder and co-founder giving 5%

rickkollmeyerApr 25, 2014

@Qouphy Often it is accomplished by adding more shares of stock to the pool, thus diluting the per-share value of the founder shares. That is, rather than selling their shares to investors, companies can 'create' more stock to represent the target ownership percentage and the investors get the newly created shares.

VishrtkApr 14, 2014

Customer discovery and validation of idea is most important to make sure that your product has ability to be sold and attract more users. If your idea is validated, you may be able get more realistic product out there in market instead of a Hypothetical assumption of needs of users.

muthukrishnanwzApr 14, 2014

Easier said than done!

Dania Van Den Berg from FacebookApr 14, 2014

Kinda Kasm

Jodee Pedersen from FacebookApr 14, 2014

Myron Pedersen

Hà Văn Duy from FacebookApr 14, 2014

So cleary system for starup. Tks you!

Andrew Mastrandonas from FacebookApr 14, 2014

A bit simplistic in my view.

Raphy Tayco from FacebookApr 14, 2014

Lennard Ituriaga Tayco Nikki Tayco

Ivan Sanchez from FacebookApr 14, 2014

Paula Ucrós Fajardo

Csaba Ferencz from FacebookApr 14, 2014

I'm not even married! ;-)

James Dirks from FacebookApr 14, 2014

Actually, many these days start with this: hype, hype, social media, hype, something that might be a product or might be vaporware, more hype.

ALS Business Solution from FacebookApr 14, 2014

why divorce dude ?

Waseem Khan from FacebookApr 14, 2014

find a person with a lot of money - INVESTOR > and then look at this one.. we should stress on this one > Give HER 10% of your company... :P give HER??? :D

Adrian Castro from FacebookApr 14, 2014

If only it were this easy.

Jorge Restrepo from FacebookApr 14, 2014

Nice

Ryan Hamze from FacebookApr 14, 2014

Ayda Qasem

Gladis Benavides from FacebookApr 14, 2014

It looks more feasible if you have a product. My product is sharing tools strategies and knowledge on cross cultural communications.

Dryden Kirembu from FacebookApr 14, 2014

Elective Yragger

ShahidBhatApr 14, 2014

Apart from all this science, the most vital element that you need is Luck.

SEDahleApr 14, 2014

@ShahidBhat Luck accounts for probably less than 10%. The rest is hard work and persistence.

Sharon Anderson from FacebookApr 14, 2014

Yeah buddy!!!

Anna Vital from FacebookApr 14, 2014

I could make a whole infogrpahic for in between every one of these steps. The sweat, the tears, the rejection. But keeping the eyes on the prize is what entrepreneurs do.