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Expect Some Unicorns to Lose Their Horns, and It Won’t Be Pretty

nytimes.com

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Re: Expect Some Unicorns to Lose Their Horns, and It Won’t Be Pretty

#11

Post by kzhahou »

draw_down wrote: post #5

Boy oh boy, this is all we talk about anymore. Always specifically in the language of unicorns too. People seem to have really latched on to that.

You're getting downvoted, but there's lots of value in your statement. Language is important, and the choice of words will frame narratives and reveal hidden truths and agendas.

The press and HN/etc DOES talk a ton about unicorns. It's the only grade that has its own name. There's no word for a $10-25m startup, or a $100-500m startup. No, only $1B-unicorns. They have their own name and we're obsessed with them. This either highlights or promotes the notion that investors (and entrepreneurs?) are only interested in billion-dollar companies.

Re: Expect Some Unicorns to Lose Their Horns, and It Won’t Be Pretty

#13

Post by daenz »

Am I reading this right?:

  1. Early investors overvalue a company at $X+Y
  2. Investors give money and get Z preferred shares at valuation $X+Y
  3. New investment round, company valued at $X
  4. Wealth transferred from founders and employees -> original investors to cover the difference $Y

Re: Expect Some Unicorns to Lose Their Horns, and It Won’t Be Pretty

#14

Post by mikeryan »

It would be interesting to see if more founders take money off the table in high value rounds as a hedge against down rounds. It's not mentioned but while the founders may lose value in their common shares a lot of them have been able to cash out in the good rounds giving them a nicer cushion compared to straight employees

Re: Expect Some Unicorns to Lose Their Horns, and It Won’t Be Pretty

#15

Post by WalterSear »

kzhahou wrote: post #11
draw_down wrote: post #5

Boy oh boy, this is all we talk about anymore. Always specifically in the language of unicorns too. People seem to have really latched on to that.

You're getting downvoted, but there's lots of value in your statement. Language is important, and the choice of words will frame narratives and reveal hidden truths and agendas. The press and HN/etc DOES talk a ton about unicorns. It's the only grade that has its own name. There's no word for a $10-25m startup, or a $100-500m startup. No, only $1B-unicorns. They have their own name and we're obsessed with them. This…

It's not surprising, considering the current standards for startup employee equity: apart from the perilous, uncertain route of becoming a founder, joining a unicorn early is the only way for rank-and-file startup employees to get any opportunity of substantive wealth creation.

Re: Expect Some Unicorns to Lose Their Horns, and It Won’t Be Pretty

#16

Post by anon8418 »

mikeryan wrote: post #14

It would be interesting to see if more founders take money off the table in high value rounds as a hedge against down rounds. It's not mentioned but while the founders may lose value in their common shares a lot of them have been able to cash out in the good rounds giving them a nicer cushion compared to straight employees

Founders can take more money off the table, but that doesn't solve for the bigger problem of down rounds mentioned in the article: employees leaving.

Re: Expect Some Unicorns to Lose Their Horns, and It Won’t Be Pretty

#17

Post by state »

ffumarola wrote: post #6

Any thoughts on which unicorns are more situated to "weather the storm" and which aren't?

With the stream of articles like this in the past few days I have been thinking the same thing. I have a feeling that it's already obvious to anyone doing real research — but I'm not paying close enough attention.

Blog post opportunity!

Re: Expect Some Unicorns to Lose Their Horns, and It Won’t Be Pretty

#18

Post by nickff »

daenz wrote: post #13

Am I reading this right?: 1. Early investors overvalue a company at $X+Y 2. Investors give money and get Z preferred shares at valuation $X+Y 3. New investment round, company valued at $X 4. Wealth transferred from founders and employees -> original investors to cover the difference $Y

Yes, that is how 'liquidation preferences' work.[1] I strongly recommend reading/watching Mark Suster, who (in my opinion) does a good job at explaining investors and terms.[2][3]

[1] https://en.wikipedia.org/wiki/Liquidation_preference

[2] http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2516

[3] http://www.bothsidesofthetable.com/

Re: Expect Some Unicorns to Lose Their Horns, and It Won’t Be Pretty

#19

Post by not_that_noob »

daenz wrote: post #13

Am I reading this right?: 1. Early investors overvalue a company at $X+Y 2. Investors give money and get Z preferred shares at valuation $X+Y 3. New investment round, company valued at $X 4. Wealth transferred from founders and employees -> original investors to cover the difference $Y

More or less - new shares are issued to investors to compensate for the decrease in valuation. Very demoralizing usually.

Re: Expect Some Unicorns to Lose Their Horns, and It Won’t Be Pretty

#20

Post by criddell »

ffumarola wrote: post #8
hitekker wrote: post #7

Earlier quoted context omitted.

Ah, it would be great to drum a list! I.e. analyze each company, their rhetoric, metrics, and current trending performance, irrespective of perceived valuations. I almost suspect someone is in the process of doing so right now.

The list of unicorns: https://www.cbinsights.com/research-unicorn-companies Would definitely love to see some analysts grade that list in terms of whether the current valuation is sustainable.

I wish I understood what it is about Evernote that makes it worth $2 billion, Dropbox $10 billion, or Nextdoor $1 billion. There aren't many companies on that list that have valuations I can understand.
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