Facebook shocked everyone in February 2014 when it paid an eye-watering $19 billion for messaging app WhatsApp. Meanwhile other smartphone apps like Snapchat have rejected billions of dollars in buyout offers.
Do you want to jump on the bandwagon and create your own billion-dollar app?
Time to build the next Snapchat. Follow these 10 simple steps for Silicon Valley stardom…
1. Develop an App With Your Frat Buddies
Snapchat began as a college assignment, developed by friends in a Stanford fraternity. They described themselves as “certified bros – our frat just got kicked off campus.”
You don’t have to be a frat boy to develop a billion-dollar app, of course. You certainly don’t need to be a “certified bro.” The point is that you don’t need anything boring like a business plan. You don’t need any kind of plan other than doing something cool. But there is one important rule you need to follow…
2. Make Sure It’s Something That the Kids Will Love
This is the most important part. When Facebook wrote that $19 billion check for WhatsApp, it was largely to get access to a younger customer base. Snapchat, too, is popular mainly with teens, and larger companies will pay a lot of money to get access to the next generation.
So your app can take any form you like, but if it helps teenagers communicate in a slightly new way, you can add a billion or two to its value.
3. Drop Out of College
Who needs an education when you’ve just created one of the fastest-growing apps in the iTunes store? Snapchat co-founder Evan Spiegel dropped out of Stanford just three credits shy of graduation, following in the college-quitting footsteps of Mark Zuckerberg, Steve Jobs and Bill Gates, among others.
4. Don’t Worry About Making Money
Revenue and profits are so “old economy.” You don’t have to worry about those things. Just keep attracting new users, and your app will be worth billions one day.
5. Snag Some Venture Capital Cash
Sure enough, the venture capitalists come knocking on your door. Congratulations! You can hold a keg party to celebrate. Snapchat raised $485,000 just a year after its creation, and raised an additional $123 million over the next 18 months.
One of the VC investors wrote a blog post enthusing about the company’s many virtues, including access to that “valuable demographic” of young folk, and said it had to compete with other firms for the opportunity to hand over cash, even though Snapchat “has yet to turn on its monetization engine.”
6. Keep Growing
It’s all about the numbers. You can figure out what to do with them later. Just get users in the door, and get them sharing. Snapchat was recently boasting 400 million “snaps” (shared photos) a day, up from 150 million just nine months earlier. And don’t forget, that’s largely from its “core demographic aged 13-25 years old.”
7. Reject a $1 Billion Offer
Congratulations! Facebook offers you $1 billion. One billion dollars in cold, hard cash, for an app you wrote as a college assignment a couple of years ago.
But wait! Hold the keg party. You decide to turn it down. What’s a billion dollars, after all, when you could keep growing? Instagram was sold for $1 billion. You’re bigger than Instagram. You have teenagers on your side. Tell Facebook to take a hike.
8. Still Don’t Worry About Making Money
Hey, you just turned down $1 billion, but who needs to worry about making money just yet? Keep offering a free app with no monetization plan, and someone’s bound to come up with an even bigger offer.
9. Reject a $3 Billion offer
Bingo! Facebook comes back just a few weeks later and offers you $3 billion. But hey, who needs $3 billion? You decide to turn it down, and keep your independence. You’ll be worth even more one day. Meanwhile Facebook indulges in some retail therapy, consoling itself by splashing $19 billion on WhatsApp.
10. Keep Growing, and Still Don’t Worry About Making Money
The future’s bright. Pinterest was valued at $3.8 billion when it raised money from investors in late 2013, and it didn’t have any revenue either. WhatsApp was bought for $19 billion, even though its users pay just a $1 annual subscription. Twitter was valued at $25 billion after its IPO, and it’s not expected to turn a profit until 2015.
So sit tight, and keep adding new users, the younger the better. As long as you can do that, some tech giant will at some point decide it needs to get down with the young people, and will pay through the nose for your user base. After all, nobody wants to be the next MySpace.
Whatever you do, just make sure the kids don’t get bored.
Not ready to start your own Snapchat just yet? Start by “Investing in Startups” before moving on to your own!