Yes or No: Unicorns in the Time of Pandemic
May 24, 2020
Each tech startup has little more chance of becoming a unicorn than you have of stumbling upon the animal version on your next nature walk. In venture capital speak, a unicorn is a privately held startup that has undergone hyper-growth in a new or changing market and is valued at over $1 billion. Such companies, when they do occur, often redefine (or “disrupt”) a market through their innovations. Journalist John Gallagher reminds us that fewer than 1% of companies reach this position in, “It’s Time We Outgrew our Fairytale Fascination with Tech Unicorns” at TNW.
“Unicorns are very eye-catching and we all love to read about them. I followed the drama surrounding WeWork with fascination, with the founder walking off with several hundred million dollars, an extremely rare outcome for a founder whose investors are in the red. Was there a different way to build the company which would have seen real value built for all involved? I certainly think so. Sustainable growth and keeping control of your company has a much higher likelihood of success for founders. Dreaming big is certainly a powerful mindset for entrepreneurs, but keeping your feet on the ground is also important for those who want to build businesses that will have a high chance of lasting more than a few funding rounds.”
Sure, it would be great to be (or invest in) a unicorn, but as we know the chances of success are slim. The more likely outcome, writes Gallagher, is that founders will burn through tens of millions of dollars in a few years only to have investors demand they sell the company with nothing to show for it but failure. The sustainable-growth journey may be boring compared to chasing unicorns, but it is much more likely to lead to a happy ending.
Cynthia Murrell, May 24, 2020
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