Unicorns Don’t Exist

There is something so funny and also so appropriate about all this talk about Unicorn companies.

I’m not the first person to say that the proliferation of $1B+ valued startups is a signal of an overheated late stage market. Yet, there continues to be so much fanfare and excitement about all of these unicorn companies.

Unicorns are a great metaphor and a brilliant meme – just excellent marketing. But what I find so funny is what is so obvious:


Unicorns are mythical creatures. And guess what, the unicorn-ness of many of these companies are equally mythical.  Moreover, all the excitement around these unicorn financings are IMHO pointing entrepreneurs and the whole market in the wrong direction.  In particular, I feel a few things really strongly.

1. $1B private financings do not equate $1B of company value. These are private sales of a minority position in these companies, not IPO’s or acquisitions.  It’s what one investor was willing to pay to have a small position in a company.  Not a measure of true underlying value.  I think Fred Wilson had a post on this a year or so ago, but I couldn’t find it, so I’ll leave my attribution at that :)

2. The goal for a great company isn’t to get to unicorn status as quickly as possible (or to be on that trajectory as quickly as possible). It’s to build a great company that creates huge value for users or customers and will keep doing so for a long long time.  I wish there was more excitement about great, durable businesses instead of unicorn financings.  I’d rather read more thoughtful reflection on what made Etsy a fantastic, thriving marketplace vs. the next company that raises a unicorn round.

3. Sometimes, great companies take time. It takes time to build a durable foundation for a great product or scaleable growth. This can be true in all sectors, even consumer-social. I loved Hunter Walk’s quick post on the “Slow Graph” as he talked about Meerkat.  No commentary on Meerkat itself, but the post points to choices focused on durability, not just the fastest rise possible. Tumblr’s user growth wasn’t actually very fast in the early years, but over time, the community became incredibly rich and robust.

4. There is a shocking disconnect between public market valuations and private market valuations, and it’s not because the public markets a) don’t know how to value these companies accurately or b) great companies find the public markets too much of a burden vs. private financing. Keith Rabois wrote an excellent post here on Quora going into more detail. Read it.

5. Some of these unicorn companies will be (or already are) wonderful businesses that will be for a long time.  My point isn’t that these companies are bad, some are great.  But in this market, unicorn status is becoming less and less of a real indicator of actual greatness (or accurate value).

I wish I could come up with a clever label for these rapidly scaling, great companies aside from unicorns. I kind of like the idea of Alligators or Sharks. Both are pre-historic and at the top of the food chain. But I guess they aren’t rare enough.  Maybe a good marketer out there will have better ideas for a good unicorn replacement.

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