With Instagram being valued by Facebook at $1 billion, Patrick Moran took a look at what it took to start your own billion dollar company:

• To be valued at a billion the conventional wisdom is that it must have revenue of around $100 million.
• However the market seems to be willing to tolerate lower annual revenue if the revenue is growing and recurring.
• Recurring revenue is easiest in the world of software where the “Software as a Service” model is becoming dominant.
• In Software as a Service customers pay a periodic (weekly/monthly/annual) fee for a service rather than pay a high up-front cost. The aim is to lock your customers into long term contracts.
• A growth rate of 20% is healthy. A churn – the rate at which you lose customers – of about 2% is acceptable.

To read more details about these requirements, why it’s important to get Instagram out of your mind, what Oracle, Microsoft, and IBM have yet to get, and the importance of paying top dollar for sales and marketing, click here.

Source: TechCrunch