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WHEN SOCIAL MEDIA software firm Sprinklr unveiled its latest funding last month, it vaulted into the club of “unicorns” – or tech startups worth at least $1 billion.
That came just weeks after Slack, which makes a business software collaboration tool, entered the group which includes well-known names like Uber and Snapchat.
While unicorns are supposed to be rare, mythical creatures, the proliferation of these billion-dollar startups has raised eyebrows as well as concerns in the fast-moving technology sector.
More than 80 tech firms can now be called unicorns, according to a Forbes Magazine list.
The venture capital research firm CB Insights lists 53 US-based unicorns, saying the hefty valuations have been fueled by a flood of private equity investors seeking an early piece of the next tech superstar.
The use of the term “unicorn” began with a blog from investor Aileen Lee of Cowboy Ventures in late 2013, when there were just 39 of the creatures and an average of four “born” each year. The number created in 2014 rose to 38, according to CB Ventures.
While some of the unicorns appear to be headed for big things, unicorn fever has raised fears of a bubble in the private equity markets.
“You have a frenzy of investors looking for the next Facebook. They saw the possibility of a return of 1,000%,” says Rob Enderle, a consultant and analyst at Enderle Group.
But these are incredibly risky investments. All of these firms are not going to get a multibillion dollar buyout or massive public offering. I think we’re going to see a thinning of the herd.”
Dead unicorns
The unicorns include a handful of startups worth at least $10 billion, a group sometimes called the “decacorns.” These include China’s Xiaomi, Airbnb, Pinterest and Dropbox, in addition to Uber and Snapchat.
Some equity investors are getting nervous over the trend.
“I do think you’ll see some dead unicorns this year,” said Bill Gurley, a partner at the Silicon Valley venture firm Benchmark, at the South by Southwest festival in March.
Gurley, who has been a leading voice of caution on unicorns, said in a blog post that both investors and startups are pushing too hard, ignoring traditional standards of risk.
“We are in a risk bubble,” he said.
Companies are taking on huge burn rates to justify spending the capital they are raising in these enormous financings, putting their long-term viability in jeopardy.”
In a running Twitter conversation on the subject, Danielle Morrill of the research firm Mattermark said “I’ve narrowed it down to 61 potential dead unicorns. This is the stuff everyone is talking about but no one will publish.”
Prominent equity investor Marc Andreessen, one of the founders of Netscape during the dot-com era who now sits on the board of Facebook, expressed similar concerns in a series of tweets last year, saying too many startups are “burning” cash too quickly.
When the market turns, and it will turn, we will find out who has been swimming without trunks on: many high burn rate co’s will VAPORIZE,” he said.
Mark Cuban, an early dot-com entrepreneur, said on his blog that the current situation is “worse than the tech bubble of 2000″ because of “angel” investors investing in apps and tech firms with little scrutiny.
I have absolutely no doubt in my mind that most of these individual angels and crowd funders are currently under water in their investments,” he wrote. “Because there is ZERO liquidity for any of those investments. None. Zero. Zip.”
Precipitous drop
There appears to have already been some shakeout. The online retail startup Fab.com, which raised $300 million and joined the unicorn club last year, ended up selling most of its assets in March to the manufacturing firm PCH in a deal reported to be worth just $15 million.
Another former unicorn, the gaming service OnLive, was acquired recently by Sony for an undisclosed price.
Many startups have been able to raise cash from eager investors without heading to Wall Street for a public share offering. This also means the firms are not subject to the same scrutiny and publicly traded company for finances and governance.
Anant Sundaram, a professor at Dartmouth’s Tuck School of Business who specializes in corporate valuations, said that while financial data on these unicorns is often limited, few have demonstrated an ability to grow revenues and establish a sustainable business.
Based on historical data, I wouldn’t be surprised if a vast majority of these firms fail to live up to their valuations,” Sundaram told AFP.
Still, he said that these types of investments are part of the process of innovation and “creative destruction” which fuel the economy.
While this is reminiscent of the dot-com boom, Sundaram noted that in the last cycle, “You had similar businesses (that) came in with very high valuations and many went bust, but this produced a Google and an eBay and a number of other standouts.”
Peter Barris at the venture firm New Enterprise Associates said investment is flowing because ”we are in the early days of one of the most robust periods of innovation I’ve seen in my lifetime.”
In a blog post, Barris said he sees unicorns transforming the way we live.
Perhaps there will even be a flameout or two spectacular enough to become Valley legend. But many companies will justify that valuation, and some will go much, much farther,” he said.
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Is that sarcasm..?
The *drab* colours of the old punt??
I’m fond of the euro, but the punt was lovely – fabulous old Irish art on it.
Am I on glue? Am I remembering it incorrectly?
I agree the art on them was very good but I do think the colours were fairly drab.
I like glue
Fairly drab, good, great, fantastic, who cares unless you can buy more for it,
You gotta love the nun on the old fiver.
Or not.
With the old punt you actually felt like you had real money that was worth something in your pocket. A 50 euro note now goes nowhere. Monopoly money.
@Karol Aww, all the pretty colours. Should we have put Barney the dinosaur, Elmo and Zig and Zag on the old punt? Would that have been colourful enough?
Len,
No, colours would have sufficed.
Miss getting a few horse monies off the oul mother.
Nice picture of Bertie on the 20
You are right. The old Irish tender was fantastic…I remember asking my grandfather about the people on the notes and him telling me stories about ‘old’ Ireland. Unfortunately that’s now lost forever with the Euro
I thought the Euro would have nudey pictures by now lol.
Drab colours of the punt? The punt had so much more character. And so much more value. Wish we had never adopted the euro!
I don’t know about not adopting the euro, but the old notes were far better. Surely the EU can agree on some universally admired people like Einstein and Beethoven to put on the euro notes.
There was nothing wrong with adopting the Euro. It was been driven off a cliff by Fianna Fail that was the problem.
A common currency was, in theory, not a bad idea. But the euro was badly run from the get go. Too much political grandstanding and not enough fiscal, economic and social considerations. It wasn’t entirely Fianna Fail’s fault. Sure, they were the biggest culprit when it came down to the local Irish economy. But they can’t be blamed for failed ECB policies in relation to Portugal, Greece, Italy, Spain, etc. So, as I said, we should never have joined the euro. A better conceived common currency, yes. But not the euro.
Greatest financial con job in history adopting the euro.
Faces on notes look better than bridges.
Ah yes our old £50 that used to last for weeks not like the new €50 which seems to vanish in minutes, fond memories……….
So that’s what a £50 looked like – don’t think I ever had one of those in my pocket. And I didn’t even know the £100 existed!!
I remember once seeing an old £50 when I was little and I remember being profoundly mesmerised. Nowadays €50 are as common as the old fivers!!
Preferred the old notes.
More character.
More of a cultural icon / connection. When you held them in your hand you knew you had money, real money, worth something.
These new ones are insipid. Bland.
Could be from any old place in Europe.
I miss the old money , heading into town on a night out with 20 quid in your pocket . happy days ..
Ah yes the old money. For 5p you could get a steak and kidney pie, a cup of coffee, a slice of cheesecake and a newsreel, with enough change left over to ride the trolley from Battery Park to the Polo Grounds.
Everything was better back then for sure.
Monopoly money soon.
“I prefer old money….money was better in them days”
as if i give a fook as long as i have any of the stuff
I remember well the one and only time I saw a £100 note as a child. To my young eyes it looked like a bed sheet. Even a £50 note was an event to break down the local.Would the bar man have change or the worry of it being fake….
Worth abut 10$ Next Year.
Send me a few dozen to examine
IMO, the nicest set of notes we ever had was the Lady Lavery collection.
That nun had a fiver on her head.
If money talks then €20 has little to say.
Wasn’t there an auld fella’ on the back too in a coat? Called “Scrotum” I think he was.
Should send every1 a new €20 note. Way better way to circulate them…
Jesus who gives a flying f*ck about the colour of the money as long as you have loads of it! It could be covered in sh*te and you would still spend it!
Any plans next year for a 1916 commemorative €5/€10/€20 note?
I was listening to a 1980s recording of Fr. John O’Connor O.P. talking about a saint in the 1800s predicting that Europe would be united under Germany and that Europe would share the same currency until 22 countries had it and then Germany would cause its break up of its Empire when 22 countries shared the same currency.
19 share it now just 3 more if you believe in Saints…??? Love the weird but take most with a pinch of salt…
You can’t fold any of the Euro notes a certain way to make a picture of Reg Holdsworth from Corrie like you could with the old £10 note
Will they still be as hard to get?
have your say