Are Oracle (NASDAQ:ORCL) and Microsoft (NASDAQ:MSFT) two of the market's greatest successes -- or greatest disappointments?

The answer, of course, depends on your time frame.

If you held Oracle from Jan. 1, 2000 until the present, your investment is down some 40%. You're likely nothing but disappointed. Microsoft is another 50% loss over the same time period. Those are downright dogs. So what's all this talk about finding "the next Oracle" and "the next Microsoft"?

Big or bloated?
Microsoft and Oracle are big companies. Oracle is currently worth $95 billion, and Microsoft is worth $270 billion. In 2000, they were even bigger. Oracle was valued close to $200 billion and Microsoft at more than $500 billion. Reasonable expectations got lost amid all the hullabaloo of the tech bubble. At market caps of $200 billion and $500 billion, how much bigger could these venerable tech firms get?

Not much bigger, it turns out. That's the danger of investing in large-cap growth stocks. While 50% does not seem like an insurmountable hurdle, $270 billion does. There are only three companies capitalized north of that number today: General Electric, ExxonMobil (NYSE:XOM), and Microsoft. It's unlikely that Microsoft will double in value any time soon. In other words, if you're looking for growth, Microsoft is not the place for you.

But it wasn't always that way.

Knockout returns for the nimble
Oracle and Microsoft are two of the market's greatest success stories. To see why, you just need to look back a little further.

Larry Ellison founded Oracle in 1977; he's served as a director and CEO ever since. He has always held a significant stake in the company. Today he continues to hold almost $20 billion worth of shares -- or 23% of the company. Since 1990, he has guided Oracle from $916 million in annual revenue to more than $14 billion. Investors have earned 2,500% total returns and 23% annualized returns -- a 25-bagger, even with the past five years of market disappointment.

The story is the same at Microsoft. Bill Gates founded the company in 1975 and continues to serve as chairman. Even after more than 20 years, Gates holds nearly 10% of all shares -- which are worth more than $26 billion. That stake was even bigger when Microsoft was a small cap. And that stake (not his salary) has made Gates a very wealthy man -- 2005 was the first year he earned seven digits.

In 1990, Microsoft had $1.1 billion in revenue. Today, it has more than $40 billion. During that time, shareholders have earned nearly 5,000% returns -- a 50-bagger. For investors who have held Microsoft for 15 years, the past five years may have been disappointing, but they haven't even tarnished an incredible investment.

Size matters
Potential is what separates small caps from large caps. Small caps have it; large caps don't. Size eventually slows even great companies like Oracle and Microsoft.

If you're looking for growth, don't bother with them.

Growth is exactly what the folks at Motley Fool Hidden Gems are hunting for -- small caps with tremendous potential. Yes, that's the next Oracle or Microsoft. These are stocks with the potential today to increase 20 to 50 times in value over the next 10 to 20 years.

Looking back
How are we going to find them? Well, the stories of Oracle and Microsoft give us two great clues. We're looking for loyal founders with large personal stakes in the companies they run. These are folks who -- just like Ellison and Gates -- are committed to building their babies into world-class corporations. They include people like Starbucks (NASDAQ:SBUX) founder Howard Schultz, who owned 5% of shares as recently as 1996, and Gap (NYSE:GPS) founder Donald Fisher, whose family continues to hold more than 25% of the business.

We think we've found a number of the next generation of great entrepreneurs already, and we believe that we can find many more. One of them is Blue Nile (NASDAQ:NILE) CEO Mark Vadon. Vadon founded the online jewelry retailer in 1999. He currently serves as chairman and CEO and owns 9% of outstanding shares. Since the company came public in 2004, it has delivered 40% gains to investors -- and it's still worth just $600 million. Blue Nile could increase 10 times in value from here -- and it'd still be a mid-cap.

If you'd like to join us as we uncover the next story stocks, try a 30-day free trial to Hidden Gems. Our portfolio of small companies currently beats the S&P 500 by 18 percentage points. You'll have access to all of our research without any obligation to subscribe. Click here to learn more.

This article was originally published on Jan. 6, 2006. It has been updated.

Tim Hanson does not own shares of any company mentioned. Microsoft is a Motley Fool Inside Value recommendation. Gap is a Motley Fool Stock Advisor and Inside Value recommendation. Blue Nile is also a Motley Fool Rule Breakers recommendation. Starbucks is a Stock Advisor pick. No Fool is too cool fordisclosure.