How many times have you asked a startup how they’re doing, just to hear “Doing great, killin’ it!”? Yet right now everyone seems to be hating on startups because they are “killin’ it”. We now call them names like Unicorns and Cockroaches and can’t wait for these companies to fail and go out of business. It’s a lose-lose situation for everyone involved, so I don’t get it.
Imagine if someone said their startup wasn’t doing well or not “killin’ it” -what would you do? You would tell everyone! That’s why no one is ever honest. These are private companies and you have absolutely no right to know anything about them besides what they tell you. Speculate all you want, but the founders of these companies will generally not respond with “no comment” -like they should. There is so much unneeded pressure on startups right now that anything less than perfection is seen as a failure.
Unicorn Valuations are probably the biggest non-issue we have right now because of a term coined years ago that has literally outgrown its own definition. Startups used to never disclose their valuations but now, it’s a PR machine. The media loves it, people want to work at these companies and customers trust in them more (hopefully).
I don’t know about you, but I’ve never seen a real Unicorn, so while they are rare (and mythical), if there are only 137 (last count?), I’m pretty sure that’s considered an endangered species.
“An Endangered (EN) species is a species which has been categorized by the International Union for Conservation of Nature (IUCN) Red List as likely to become extinct. “Endangered” is the second most severe conservation status for wild populations in the IUCN’s schema after Critically Endangered (CR).”
Only when looking up this definition did I learn about the Critically Endangered status which is probably more fitting. According to CB insights, you have a 1% chance of becoming a Unicorn if you received prior funding years ago. You’re still probably wondering why there are so many Unicorns, right? I will get back to you in my next post on investing/VC business models.
People want them to fail
This is just crazy… I can understand if you don’t like someone personally or they compete with you or your business, but just hating them because of their private valuation? –Seriously?! These are companies that started from nothing, gained traction, raised some money, hired a bunch of people and for these reasons, you don’t appreciate them?
*Disclosure: Admittedly, there are some companies that should never have started or been funded.
As for me, I don’t really care for movie celebrities, whose companies portray our industry, but I can’t hate or wish these companies to fail as I don’t know these people personally. Wanting a startup to go out of business means you want someone to fail, causing lots of people to lose money and good, hard working people to get fired. That’s like wanting an athlete to get hurt.
“Stupid” and “unsexy” ideas/business can work
Snapchat is so stupid, right? But now it’s worth $19B, and apparently generating over $100M in revenue. By no means does this mean they are “successful”. However, they are definitely onto something. Admittedly, I thought the first iPhone in 2006 would fail. (I bet against Apple’s stock in my college business class. I still got an “A” in the class but now you know why I’m not a banker… among other reasons.)
Instagram was Burbn, Twitter was Twttr and Pinterest was Tote, all before they seemingly failed, pivoted and found something that works. Pivoting is generally a good thing — you tried an idea that didn’t work, learned something along the way, and then worked through the ideas to make it better.
I get pitches all the time from startups that aren’t doing anything original or are very B2B/enterprise and unsexy. This isn’t Shark Tank. We don’t need the glitz and glam that make good TV — we need companies with great teams that can execute well and exit (acquired/IPO) because that’s our business model.
So what to do now?
First, STOP HATING! Just because there are so many Unicorns that have raised hundreds of millions, even billions of dollars, doesn’t give you any reason to hate them. This is just their job that they are getting paid to do, with hopefully the upside of getting acquired for some multiple, so all the extra hard work will pay off. It’s also the only way that investors will make their money back too.
If anything, you should want these companies to be successful, because when (not if!) these companies are successful and exit, all that capital will be liquidated. That’s when the real fun begins.
Image Credit: CC by martin