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I've had this thought in my head for quite some time about what I call "bottom line companies" - That is, companies that add "substance" to the bottom line of society. When I think about bottom line companies, I think about GE, AT&T, CN, JetBlue, Mondelez International (Kraft) and the like. I often wonder about how these ventures got started. Over the past 20 years, have we seen many bottom line companies founded? Also, tangentially but interestingly: http://www.inc.com/magazine/19850501/495.html

These are all brick-and-mortar companies that were built around a single product (electricity, telephone, railways, airlines, dairy roll-up) and later expanded by merging with competitors or expanding into related fields. You can also add P&G, General Mills, Johnson & Johnson, PepsiCo, and many more.

In each and every case, these companies delivered a product or service in exchange for the customer's cash. This is the key distinguishing factor between companies like IBM, Microsoft, Apple, who deserve to belong on that list, and companies like your hyped SV unicorn that has no business model besides "eventually we'll introduce ads".

"If we don't want to look like we are harvesting data for ad networks, we'll just sell to Google."

If someone wanted to start a company with a definite product (not ads), maybe even a brick and mortar product, how does the process differ with starting a garden-variety startup?

It doesn't, really. It's just that these companies tend to draw more modest valuations, generating a more subdued kind of excitement. Forbes just wrote about how VCs should invest more in B2C startups [1]. A different piece from CB Insights last year [2] argues the same point. There are some VCs who specialize in B2C stuff, Maveron [3] being notable on the West Coast. Mostly, though, this capital does not concentrate in a small area like SV.

[1] http://www.forbes.com/sites/chrismyers/2017/01/09/why-entrep... [2] https://www.cbinsights.com/blog/vc-investing-in-consumer-goo... [3] https://en.wikipedia.org/wiki/Maveron

Conventional wisdom says you should only go with VC money if you have a rapid scaling step that requires astronomical burn rates while you capture market share. Usually rapid scaling like that comes from some sort of network effect (you will switch to facebook because everyone you know is).

Brick and mortar products are less likely to have this property than social-network-of-the-month, so the process can be very different.

Chinese can rip it off, or one of the big players just subsumes your idea in some way. Or it ends up trivialized as "as seen on tv"

What about Tesla, SpaceX and even Airbnb. Shouldn't those be allowed on the list as well? They have very clear business models and don't have to get acquired by anybody and are providing tremendous value.

Absolutely. Would you put companies like Facebook, Twitter, or companies that may struggle to fix unit economics like Uber or Lyft on this list?

I want to know your bookmarking methods because you clearly have it figured out :P

If that is bookmarking I'd be surprised. I'd bet it's instead the `site:` search modifier on Google.

I used HN search, through Algolia.

Wow, you are really good at HN - Thanks for this. :)

I don't know how this fits in with your "bottom line" concept, but the purpose of a business is to create some amount of value for its customers _and_ retain some amount of that value for the business owners.

As a big positive, we have seen large strides taken in SV on the former part the past 10 years. Creating value for your users / customers is standard advice pounded into entrepreneurs by YC and everyone else these days. This is great.

The problem is the latter half, capturing some of that value. Some of it is structural; many industries do not lend themselves well to wild profitability. Other is cultural; startups like building White House replicas in the lobby of their expensive new building.

We have seen many companies that create a great amount of value, and can even retain some of it, but unfortunately not enough to meet investors' expectations. Twitter, for example. Medium, for another more recent case, would be a great small business, but can never live up to a $100M+ investment. They definitely create value, it's just questionable exactly how much, and it will be very difficult for them to retain a worthwhile portion of it.

The purpose of a business is to create value (usually financial) for its owners. Creating value for its customers is a means, not an end.

Over the last 20 years, thousands of these bottom line companies have been founded. You may not familiar with all of them, because much like AT&T or GE, they take decades to get big enough to show up on the radar of a distant viewer.

Take this guy for example, the pillow king (as bottom line as Oreos):


Or Chobani, which most know about now:


Or Manoj Bhargava of 5 hour energy fame:


Or Monster Beverage (reinvented in the early 1990s), which has become, well, a monster ($25 billion market cap):


Or Under Armour, founded in 1996, on its way to being a giant potentially.

Or Lululemon, founded in 1998.

Netflix and Tesla are also both bottom line companies.

Tory Burch is an example, as is Sara Blakely & Spanx. Fashion has a lot of significant bottom line stories from the last 20 years. Hard to tell which might grow into the next big fashion conglomerate, or just be acquired (as with Burch apparently).

There are a lot of these types of stories roaming about, and far more of them that have yet to break the media surface but will in the next five or ten years. You often don't hear about them until they get big enough to be picked up by the likes of Bloomberg, Forbes, Fortune, et al. It's also next to impossible to tell which one of them will go on to become a big conglomerate like Mondelez; we'll find out in 30 or 40 years.

I think another good example would be the craft beer industry. The brewers association directory[1] lists around 200 regional and large breweries in the US, and somewhere around 5000 microbreweries and brewpubs.

Granted, some of these are more than 20 years old, but the movement grew the most through the early 90's[2].

[1] https://www.brewersassociation.org/directories/breweries/

[2] https://www.brewersassociation.org/brewers-association/histo...

Book suggestion: "beyond the pale" by Ken Grossman, founder of Sierra Nevada. Probably my favorite book about a startup ever. Great example of both bootstrapping and also a founder knowing his craft completely.

Your analysis is essentially a different spin on "The US doesn't manufacture anything anymore." When you say "substance" what you mean is physical goods (edit: or infrastructure) - and the number of service companies founded is outpacing physical goods companies by far.

So when we say that "services" industries are growing faster than industrial manufacturing, this is exactly what we're talking about. It's not just dog walking, it's pinterest.

> When you say "substance" what you mean is physical goods

The citation of AT&T and JetBlue by OP seems to disagree with this, so I don't necessarily agree with this reinterpretation of the OP's analysis.

As an example, one could argue that companies involved in self-driving R&D could very easily meet this definition as a provider to the bottom-line of society as transportation to/from a location is a service not terribly dissimilar to providing data and communication. By that token, Tesla and soon Uber could soon fit this bill as service organizations (disregarding Tesla's manufacture of vehicles).

I agree although I also don't know what "substance" is. If they're contributing to the monetary value of goods and services being sold to an end user, they're contributing to GDP. If they're not, they're not.

Other than that--or by explicitly considering only manufactured goods for example--you're effectively making value judgements about what products and services contribute to society and which don't. You could equally as well argue (though I wouldn't) that the 50th new rebranded and repackaged laundry powder doesn't contribute either.

One definition of "substance" might be consumer surplus. Electricity provides massive utility to society, despite its relatively cheap price. Consumer surplus is not reflected in GDP, but it is certainly real and important.

Yes I think it is a value judgement, hence it's just a silly theory that lives in my head. :)

AT&T is fundamentally infrastructure, not just service. JetBlue while yes it is service, is also closer to infrastructure than it is concierge.

I distinguish services vs infrastructure based on if they are fundamental needs, not how they are provided. So water treatment is technically a service, but it's a fundamental piece of life so it's infrastructure.

Are telecommunications and flight fundamental needs? Humans lived for hundreds of thousands of years without them. Yet I agree that they are infrastructure. On the other hand, humans have not lived for hundreds of thousands of years without food, yet I would consider McDonalds a service.

Personally, I think the distinction is in how it is provided. The copper/fibre line to your home is what AT&T has to bring to the table. JetBlue brings their fancy flying machine. The water treatment plant has their water treatment system. While people are certainly involved in the process, the defining feature of these businesses are related to the machines/technology that they possess.

On the other hand, McDonalds certainly has a kitchen, but so does everyone else. They are literally found in almost every home. What McDonalds, and restaurants in general, bring to the table is a person willing to do the cooking and other related activities for you. Because the defining feature is related to human labour (for now, at least), these are services.

Indeed, the comment above isn't quite what I meant. For example, one of the reasons I included Mondelez is that my theory includes the idea that in providing low cost commodity "food", families had other areas of the economy they could spend on (education, entertainment etc).

Societal benefits may be one thing, though I'd say for companies of this size it's only a side-effect of economies of scale, but as far as most of us experience them Mondelez is pretty standard CPG company.


I was way more focused on Kraft than Mondelez - I mentioned Mondelez first because HN seems to want you to word things that way, but really, I was more thinking about Kraft as it's funny little dairy business from the 20s to 30s. :)

There is no more "textbook CPG" than Kraft :)

It's not even true that the US doesn't manufacture; manufacturing output (by value) is the highest it's ever been[1]; it's just that far fewer workers are employed to do so.

(Same as the pattern with farming; there's a difference between "the US doesn't produce many crops" and "the US doesn't have a big fraction of workers in farming": the former is false and the latter true.)

[1] https://fred.stlouisfed.org/series/OUTMS

Yes, well that's exactly my point. Plenty of startups are making stuff - so saying "where are all the real companies" is just paying attention to headlines. I have two friends that have CPG startups, and most SMB's are exactly that - so they are definitely out there.

Just to clarify, I was trying to support your point with that comment.

I would put Google in your list. Google search has been an amazing contribution to human productivity.

>> GE, AT&T, CN, JetBlue, Mondelez International (Kraft)

>> Over the past 20 years, have we seen many bottom line companies founded?

What's great about the list is that JetBlue was founded within the last 20 years. I would also consider Google (1998) and Facebook (2004) to be candidates for "bottom line companies" although I'm not 100% sure I know what you mean by that.

But yeah, it's hard to build a cash-spewing colossus with global reach in 20 years.

I'm going to remember that term. Do you think it's possible to quantify that concept?

I'm a crappy economist. In theory I think it should be somewhat/somehow linked to productivity. If a company positively impacts national productivity the company would be a "bottom line" company?

I guess so. Seems like the companies you listed all deal with 'basic human survival' - in 1st world countries, things people need in order to achieve an above average financial state. So not google, facebook, uber, etc. because you can do really well without them. And the ones you mentioned, GE, AT&T, CN, JetBlue, Mondelez International (Kraft), are much closer to to providing actual necessities - you can't do a ton without household machinery (e.g. food prep equipment), or cheap food; cheap long-distance transportation can be crucial to success, as would be phones.

The term you're looking for is "natural monopoly". These companies are all so large and old because they were the first players in markets where returns to scale are staggering, and barriers to entry are almost impossibly high to overcome.

Most of them were blocked from actually becoming horizontal or vertical monopolies by governments in order to protect consumers and foster innovation.

But that didn't stop them from acquiring tangential companies and becoming multinational conglomerates - every country in the world needs Kraft's consumer goods and GE's industrial equipment.

Software startups follow an entirely different business model - extremely low costs to entry, entering new markets with high rates of failure. Also, in many successful acquisition exits the startups are acquired and the brand disappears.

> The term you're looking for is "natural monopoly".

Not really - a natural monopoly occurs where early entrants have such a huge advantage in providing goods or services that competitors are not able to sprout up. It may be due to high capital costs, regulation, distribution channels, or even controlling material supply. Companies like Jet Blue are clearly not natural monopolies - in fact as a relatively young airline they were able to establish that the Airline industry is not subject to natural monopolies (although the capital costs to start up are very high).

Kraft on the other hand has a ton of competition, with more new food producers popping up every year. The capital costs to start are not that high, and distribution channels are open enough that lots of smaller companies can get exposure to customers.

You wouldn't include Google in that category?

Can't speak for anyone else in the thread but I probably should have included google, yes.

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