The Billion Dollar, Single Person Company
The Billion Dollar, Single Person Company
A step by step guide
The prediction
A few months ago, Sam Altman, the CEO of OpenAI, made an intriguing prediction at the JP Morgan investor’s conference: one day in the near future, a single-person company will be worth a billion dollars thanks to AI technologies.
Quite a bold prediction!
But is it really possible, even with all the amazing advances in AI technology? How would someone actually achieve this?
A counterpoint
Before diving into this thought experiment, I’ll start with a counterclaim: I don’t think it will happen!
The reason is simple. Suppose someone figures out a business that could scale to a billion-dollar valuation. As the business grows—whether it's valued at $10 million, $20 million, $50 million, or $100 million—at some point, the solo entrepreneur will likely think about hiring help. They might want assistance to handle the increased workload, take a vacation, or have a backup in case of illness. Even if a single person could manage everything initially, the prospect of hiring someone to go faster or more efficiently would be too tempting. So, while it’s theoretically possible, I think it’s impractical. Someone would have to prioritize the idea of being a single-person company over the advantages of having a team—even if a small team.
That said, it is still an intriguing prediction worthy of a thought experiment. How could we build such a company?
To start, let’s define our ground rules. What type and attributes of the company would qualify as achieving the billion-dollar, single-person company goal? For simplicity, let's include companies that use contractors and vendors. Many small companies today make extensive use of vendors and contractors such as lawyers, accountants, and so forth. A small, ten-person company does not typically need to have a full-time accountant or lawyer on staff. In today’s modern Internet-driven economy, nearly every function in a company can be available through vendors of contractors, be it lawyers, accountants, engineers, writers, marketing people, manufacturing, or salespeople.
For this thought experiment, however, let's exclude scenarios like winning the lottery, pure financial investing, or owning intellectual property worth a billion dollars, such as a unique cartoon character or comic book. Our billion-dollar company must provide a product or service more akin to a traditional company.
The math
With those ground rules, what does it mean to be a billion-dollar company?
Sam was clear that he meant a company with a billion-dollar valuation. If we look to the NASDAQ, where many technology companies are listed, we see a current average price to earnings (P/E) ratio of 32.07. Historically, the average is 28.73. To keep our match simple and clear, let’s go with a more conservative ratio of 25. There have been times in the past when the average P/E was as low as 14, after all.
Assuming a P/E of 25, a billion-dollar valuation company must generate $40 million a year in profit. Financially savvy readers will appreciate this is a vast oversimplification! I suspect that our hypothetical company, if it were ever to come about, would likely have a much higher P/E ratio. But for our thought experiment, let’s stick with the historical average.
Forty million dollars of profit is a tall challenge, but it’s even tougher when considering competition. That much profit will undoubtedly attract competition.
In years past, one of my roles at Microsoft was running the Corporate Strategy group. We had a number of different responsibilities, from M&A to five-year P&L forecasting, but at the core was this idea of trying to identify the places where Microsoft could grow. Or, more simply, where were the billion-dollar opportunities for Microsoft?
From 2022 to 2023, Microsoft's revenue grew by over $13 billion! To put that in perspective, Alaska Airlines, Airbnb, Hertz, and Jet Blue all generate roughly $10 billion of revenue apiece. That means Microsoft needs to grow the equivalent of an airline company each and every year!
A one-person company on the path to creating a billion dollars of value will attract attention not just from the major players but pretty much every mid-size company in the relevant markets as well. It might be possible for such a company to compete, but at some point, the sheer muscle of a bigger company will likely prevail. They will have more staff for sales, account management, customer support, and product development.
Thus, to avoid attracting the attention of big companies, our hypothetical solo entrepreneur should aim for multiple smaller opportunities rather than one huge one.
Portfolio of micro-businesses
If a single product would generate too much attention, what if we had four ten-million-dollar products? Or forty, one-million-dollar profit products?
Let's start with just the one million dollars of profit from a single-person company. This is tough, to be sure, but doable. For example, the top 3% of single practitioner law firms can make a million dollars a year or more. Similarly, there are numerous entrepreneurs who have managed similar levels of success—this is a fascinating interview:
While difficult, it’s clear that it’s at least possible to create a single-person business with a million dollars worth of profit.
But forty of them? Would that even be possible?
On the face of it, probably not. If you assume a standard forty hour a week work week, that would mean spending only one hour a week, or four hours a month on each business. That is an unrealistically low amount of time, particularly if the businesses were all different.
Another way to look at it is the effective profit per hour. At 50 work weeks per year, one hour a week means making $20,000 of profit every hour worked on that business if you only get four hours a month on the business. That’s a tall order.
Enter AI!
Instead of the entrepreneur working just one hour a week at each of these businesses, what if an AI could do the work? An AI employee would not need to eat, rest, or vacation. Working 24 hours by 365 days, a single AI employee would only need to make $114 of profit an hour to generate a million dollars of profit each year. And, of course, if you could have ten or even one hundred AI employees instead of one, that means an individual AI employee would only need to generate $1.14 of profit an hour.
What businesses could be run (or augmented) by an AI worker for $1.14 an hour?
That, of course, is now the billion-dollar question!
One way to approach answering this question is not to answer it!
Simply ask other businesses, “If I could build an AI employee for you that only costs $2.00 an hour, would that be useful to you?” (remember, AIs have costs of their own; by charging $2.00, we’re leaving some room for the $1.14 profit!).
There are numerous possibilities, from monitoring security video feeds to using AI agents to assist in customer support. Some of these scenarios will be covered by third-party tools—there are over 67,000 AI startups now trying to solve everything from legal AI agents to marketing AI agents.
Thus, when our entrepreneur asks prospective customers about how AI might help them, there are going to be three possible answers:
Not yet! The technology is just not ready yet (e.g., it’s going to need something like the Tesla Optimus Robot):
Problem Solved! One of the 67,000 AI companies is solving their scenario.
It’s close! The technology exists, but it needs to be adapted to the company’s internal processes and workflows. Now, we have a business opportunity for our entrepreneur!
More generally, broadly speaking, I think this “last mile” problem will create a lot of new value for AI-focused companies. Typing in a ChatGPT window can be brilliant for a software developer or a writer, but it’s likely not the right experience for a security guard on patrol, for example—even if the underlying AI technologies are capable enough to provide assistance for that security guard.
This is not just hypothetical pondering! A good friend of mine runs a business in the hospitality industry; it specializes in compliance with government regulations (which are complex, as regulations often are!). He asked that I keep the name confidential as they do over $3 million of revenue annually, and it’s just him and 4 AI agents!
However, the AI is “behind the scenes,” so to speak—he delivers the service that his customers value; how he does it is up to him. His secret sauce is solving that last mile—bringing the AI's capability to his customers in a way that solves the customer problem.
Clearly, then, it’s possible to build at least one highly profitable business backed by AI employees. If AI is doing most of the heavy lifting and everything else (sales, marketing, support, etc.) is outsourced, what if our entrepreneur just kept building these businesses until there was a portfolio of forty of them?
Bingo—there is your billion-dollar, single-person company.
The practical
As I argued initially in this note, the temptation to hire and grow faster will be too strong and compelling. Thus, the “single person” aspect of this thought experiment is just that—a thought experiment.
The insight from this thought experiment, however, is much more valuable I think!
Just run the thought experiment in reverse! Instead of asking how to create a billion-dollar, single-person company, ask the question posed above: “How would my business change if I had a 24x365 AI employee at $2 / hr (or less)?”. Whether you build that AI tool yourself or buy it from one of the 67,000 startups, those AI employees are coming. If you don’t hire them, maybe one of your competitors will.
Whichever company does this the best (i.e., figures out how to harness the power of AI effectively) is going to be well positioned to shift the landscape in their respective industries completely. They could rapidly either take share away from competitors or simply buy those competitors and retool them with their enhanced processes.
We have seen these kinds of changes throughout history. The Industrial Revolution displaced many traditional small craftsman-style manufacturers of the era; automobiles displaced horse-drawn carriages. Even more recently, mainframe companies were largely displaced by minicomputer companies, which, in turn, were displaced by personal computing-based companies. The cloud and Internet spawned many of today’s giants, like Amazon, Google, and Facebook. The top 3% of industrial farms now account for a staggering 44% of food production in the United States! From time to time, technological advances drive seismic shifts in the economy.
Clearly, we are in the early days of another seismic shift! Rather than be abstract and far off, make this an opportunity for today and ask the simple, practical question: Could a $2-an-hour AI help your business?
If yes, I’d love to chat and learn more!