This statistic becomes even steeper when it comes to private companies, where an even smaller percentage hold the key to a significant portion of generated wealth.

Achieving enduring success across multiple decades is a rare feat for businesses. So, what’s the secret behind crafting a company that belongs to the top “1 per cent”?

At the SWITCH 2023 conference earlier this month, Shailendra Singh, the Managing Director of Peak XV, shared his insights and strategies on building long-term, generational companies.

Too many founders build startups “for the sake of building startups”

Drawing from his extensive experience of working with founders over the years with Sequoia Capital India & Southeast Asia (which has now been rebranded to Peak XV), Shailendra finds that too many founders build startups “for the sake of building startups”.

This is why many of these founders are often fixated on addressing short-term goals and immediate financial concerns, like how to make the next bill and survive for the next three quarters.

There has been so many times I’ve spoken to founders and they’re like, hey, it’s going great — I’m building a product, I’m going to get product-market-fit (PMF). But I always ask them, what about five or 10 years later? Where will your business be then?

– Shailendra Singh, Managing Director, Peak XV
Instead of focusing on short-term goals, it’s important to have a solid long-term plan to create the “one per cent company” that can withstand the test of time. A vast majority of startup founders often do not ask themselves if they have an enduring business and are late to the game when it comes to identifying key factors that can support the longevity of their ventures in the years to come.

By considering these elements from the outset, startup founders can ensure that their business not only leaves a lasting impact, but also carve out a meaningful space in the market over the long term. “If I were to build a company with this mindset, it would be legacy creating,” said Shailedra.

Having a truly differentiated product
Another key factor that can contribute to successfully building the top “one per cent company” is a compelling PMF. However, many founders tend to overestimate the fit between their services or offerings and the market demand.

Often times, founders prematurely assume that they’ve secured a strong PMF when a few people purchase their products or services. However, in reality, this could indicate a weak PMF, as the broader market demand might not be adequately addressed.

What I always tell founders is that it boils down to something we call ‘calibration’. Let’s say you’re looking for product superiority, how much product superiority is enough? Or if you’re looking to solve a pain point, how strong should that pain point be?

Most founders tend to set the bar too low when it comes to this — they’re happy with a little bit of product superiority.

In order to successfully build a multi-generational company, Shailendra views that it’s important for founders to set an “extraordinarily high bar that they set for themselves in how much better their product will be”.

The founders of these exceptional companies typically posses “unique and compelling insights” on both the “why’s and how’s” of crafting a superior product, differentiating them from competitors in the field.

But how can founders know if they have a compelling PMF? “I always tell [founders], you know what, you won’t have to ask anyone. When you have really strong PMF, you will feel the pressure of building the company so fast, you won’t have to ask anyone — people will be pulling your product,” says Shailendra.

With high demand and conversion rates, founders who have a good PMF get a better shot at building the top “one per cent company”.

The cornerstone of a thriving company rests on its founders
Besides PMF, having a world-class team is an integral aspect to building a multi-generational company. “None of the one per cent companies are mercenary companies built for money. They’re built by people who are really willing to commit their lives,” says Shailendra.

But beyond the importance of a “mission-oriented team” with “phenomenal culture”, the cornerstone of a thriving company ultimately rests on its founders. Citing billionaires Warren Buffett and Charlie Munger, Shailendra says that the most valuable input in a company is a founder’s input, which is why it’s vital for founders to be “efficient learning machines”.

“I tell every founder that they, themselves, are the rate limiting step of their companies and if they don’t learn and grow personally, they can’t build a huge company,” he said.

Contrary to the “fake it till you make it” mantra, Shailendra believes that the best founders that can lead to company’s growth are those who are authentic — those who wholeheartedly invest themselves in the venture and “are in it for the right reasons”.

This was one of the key factors that drove Shailendra to personally invest into Carousell Group back in 2015.

The three of them [Carousell founders Quek Siu Rui, Lucas Ngoo, and Marcus Tan] came in shorts and their standard Carousell T-shirt to have a quick coffee. I only ever saw them in that T-shirt for the first five years since we invested into them.

And in that 15 to 20 minutes meeting over coffee, I said, look, [Sequoia Capital] would love to partner with you. These guys were authentic — they were exactly what we look for in founders. They had a product DNA and insane love [from] early users, albeit they were very small numbers.

– Shailendra Singh, Managing Director, Peak XV
You don’t have to be in the “one per cent” to be successful
The term “unicorn” is used to define a startup that has reached a valuation of US$1 billion, and most people tend to associate this term as a mark of success.

While the billion-dollar milestone is a good indicator for a startup to evaluate itself, it isn’t really clear if its business is a sustainable and enduring at that point in time, especially as these companies are still in a growth stage and may be burning cash. The only thing that’s for sure is that these unicorn startups are highly valued.

Ultimately, building a one per cent, generational company lies in the idea of “truly thinking and acting in decades”. Nevertheless, success can still happen even if your startup is not in the one per cent.

You don’t have to be one per cent to be successful. Your startup can still make tens of millions and hundreds of millions of dollars even without being in this group, but we can at least aspire to try and build these one per cent companies.

– Shailendra Singh, Managing Director, Peak XV