Instagram is just the start
The first single employee business worth $1 billion could arrive sooner rather than later, making use of new software and near-free distribution methods.
According to Magister Advisors, technology companies are increasingly benefiting from new technologies which are enabling dizzyingly fast growth among start ups, all without a large headcount. In the future this could mean headcounts dwindling towards the zero mark.
With Instagram getting picked up by Facebook recently, a trend in companies with low staff counts and sky high valuations has emerged.
Instagram, with 13 employees, was recently bought by Facebook for $1 billion. This roughly translates as a value per employee of $77,000,000 per individual.
In comparison, Apple, with 60,000 employees, has a value per employee of $10,000,000. For Microsoft, which has 92,000 staff, it’s $3,000,000.
This points to a new breed of company, according to Magister Advisors, which is increasingly able to generate wealth without a large headcount.
Revenues are being accrued at even faster rates for increasingly smaller firms, the research suggests, with Facebook’s revenue generation accelerating by 40 times that of Microsoft.
Part of the reason for this are cheap distribution channels and the ability for start ups to develop software application products quickly and cheaply using tested code.
It may be a nice trend for company owners pocketing the money, but for employees helping build the firms to such lofty heights it is perhaps less pleasant as services are made redundant.
According to Victor Basta, Magister Advisors managing director, there is an increasing ability to create value swiftly with minimal operational risks. “Businesses no longer need 500 or more employees to manage and implement sales, marketing and distribution channels,” he said. “We have established free distribution channels, download business models, lots of free or near-free open source software code and the growth of user-connection marketing.”