A eulogy for all the dead unicorns
My name is Buck Stops and I head up a mutual fund with more than $90 bn in assets under management. Like many of you here today, I owned stakes in several unicorns. And now I’m here to pay tribute to those that are no longer with us. Hendrix, Winehouse and Cobain all died at 27; all were mourned for being taken too soon. But the unicorns I’m referencing departed when far younger. Many were scarcely a glint in a start-up founder’s eye five years ago. And in five years’ time, most will amount to little more than an archived article on TechCrunch.
As I prepared for this service, I asked myself: what went wrong? And I came to the conclusion that we investors must shoulder some of the blame. You see, we made it worse because we enjoyed investing in these unicorns. They made us excited to get out of bed every day. By contrast, how many public companies could be worth next-to-nothing one day and a billion dollars the next?
We all fell for the founder hype. We loved the prodigal college dropout stories. We were charmed by the hoodies and sneakers. These fresh-faced founders made investing fun again. We were all vying for a piece of the next Uber, or the next Airbnb. We wanted a slice of exposure to whatever it was. Tinder for pets? Uber for bus drivers? Sounds great!
Industry by industry, these new players were rewriting the rules. They seemed to have it all: the glamour, the press coverage (and the downloads). And they were changing the world. Even if they weren’t, it seemed like they were destined to. The tech journalists wanted to believe in their hype and their vision – and so did we.
But then came the write-downs, and the let-downs: the scandals at Theranos, the controversial healthcare start-up valued at $9 bn; Uber’s reported losses; Snapchat’s overhyped valuations; the write-downs at Dropbox. The adjustment was painful. When things were rosy, all was well. But as doubt began to plague these valuations, it started to feel like we were riding the roller coaster without being strapped in. We investors made ourselves vulnerable. We should have heeded the warnings. We deserted our public companies and we paid our unicorns a disservice as a result.
Hindsight is a wonderful thing, as is compliance. We should have made sure those unicorns brought in sufficient regulatory expertise. We should have made certain their boards had outsiders with public company experience. We should have cared about securing protection for investors. We should have scrutinized their business models more closely. Instead we rode on their coattails and drank Champagne at their launch parties.
We let these poor unicorns meet their early demise by fueling their hype and then propping them up when it was obvious they weren’t viable. We didn’t hold them to account. We didn’t want to ruffle feathers, and we didn’t want to be the loser who turns the lights on at the party. Looking back, it was hard not to get carried away by the projections and the initial funding success stories. We let them think they knew best because we wanted to believe. And we all wanted a piece of the future.
And now we’re left with the specter of these unicorns: another slew of victims from another speculative bubble. The years go on but we just keep making the same mistakes – it’s just the losses and write-downs that get bigger.
So, anyway, I had a thought in the cab on the way over here: Uber for undertakers. How about that for a business idea?
This article appeared in the Summer 2016 issue of IR Magazine