One-man firms worth a billion could be reality
RESEARCH by a leading M&A advisory firm suggests that we are approaching an age where companies can be worth billions despite having “near-zero” employees.
Magister Advisers believe that the success of firms such as photo-sharing service Instagram – sold for $1bn (£617m) last month despite being less than two years old and having just thirteen employees – shows that firms no longer need to hire staff in order to build value.
“A new breed of super-efficient technology companies is already emerging, capitalising on near-free distribution channels that enable entrepreneurs to find significant markets for their innovations with minimal capital investment and virtually no headcount,” Magister says in the report.
“The opportunity to create huge value – and create it quickly – has never been greater, with minimal operational risk. The arrival of the $1bn one-employee business is surely imminent.”
Contrasting today’s start-ups with their heavily staffed predecessors, the report suggests that the modern Microsoft would not “need 500 or more employees to manage and implement sales, marketing and distribution channels”.
“Microsoft and Apple were both built on the entrepreneurial genius of a handful of individuals. The difference was that they needed to build a whole infrastructure to grow.”
Magister goes on to suggest that the value of a company will increasingly reside in just a few highly-talented individuals.
“What today’s business models make clear is the huge amount of value that resides in individual employees in successful technology companies, something that hasn’t been visible before,” the firm says.
“[Apple] is a business with a current market valuation of more that $600bn. If you strip Apple down to its innovative core, the value that can be ascribed to a very few individuals could be measured in the billions. If Apple was starting out today, the same core group of innovators could create billions of value very quickly.”
Instagram co-founder Kevin Systrom sold his firm for $1bn