Good morning, All,
Our next Breakfast with an Investor will next Thursday, April 16th, with our guest investor Kelly Hoey. Speaker, strategist and investor, Kelly Hoey is known for her leadership in building valuable professional networks, understanding the dynamics of engaged communities and the “how” of raising visibility, online and off. She is also recognized for her “boots on the ground” leadership in the startup community by her investments in and promotion of women in tech. More on her below, and register here.
We’ve never been a big proponent of fake it till you make it, but we know that many people are, and we do understand that when you’re starting out, many a times, you’re more or less making it up as you go along anyway. But that’s different.
Considering some of the insane valuations that we’re seeing coming out of West Coast companies, well, it is arguably more or less a case of fake it till you make it. The numbers are essentially based on nothing real – it’s smoke and mirrors, and Kelly Hoey, who is speaking at our next breakfast, wrote a post suggesting that we change the definition of unicorns so that it reflects, rather than a billion dollar valuation, it be based on billion dollar exits, or as she put it, emerging tech companies that have valuations over $1 billion at the time of the liquidity event for investors. Motion carried?
As for fake it till you make it: during the days of web 1.0, this concept was largely contributory to the idea that you didn’t need a business model, or as it goes out west: launch, get the eyeballs and figure it out later. Fake it till you make it. Eyeballs uber alles, and as we know, many of those companies – et al – never did make it (76 of the Biggest, Costliest Startup Failures of All Time).
Back in September, Tinder was placed squarely as being on track towards attaining unicorn status (Dating app Tinder set to explode to $1 billion). Since ‘free’ can sustain itself for just so long without that OPM (Other People’s Money) high, they started experimenting with revenue models (New Tinder Charges Whatever It Wants). The results: Tinder has stagnated and Bumble and Hinge are on the rise, both of which leverage users’ Facebook connections as a way of prequalifying potential hook ups. There’s always a better mousetrap, but doubtful that Tinder’s adding ads will help lure new users (Tinder’s First Advertisement Is One Big Experiment). The problem with banking on eyeballs is that they tend to wander off to the Next Thing.
Notes Hoey, “Snapchat, Uber, Pinterest, Airbnb and Dropbox. Take out your calculator: Uber’s unicorn valuation is higher than the market capitalization of most of the Fortune 500…In mid-March, Pinterest raised $367 million in a new round of funding escalating its unicorn ranking from $5 billion to $11 billion.” Eleven billion, Gracie? How much of that $367 goes towards just making payroll and are we looking at pre-bubble 1.0 economics once again? Only the numbers have been inflated to deceive the clueless.
Media hype goes far towards crowning the next unicorn. And MarketWatch might have gotten it right when they said that Tinder was set to explode, as more and more users are swiping left. With so many newly minted unicorns of late and the number seemingly growing almost beyond comprehension and oblivious to the reality of what the market will bear, having witnessed the first bubble and mindful of how long it took for the industry to come back – years, not months – we side squarely with Hoey on the revised definition. Either that, or we’re going to find a lot of unicorns drowning in their own Kool-Aid. Onward and forward.