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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

#51

Post by mark242 »

mbdev wrote: post #41
rcarrigan87 wrote: post #33

This is almost becoming a self-fulfilling prophecy. Enough articles are written calling for down rounds, now investors are thinking down rounds, employees are sprucing up their resumes, lawyers are preparing for battle... Can anyone really say if there is any proof to this rhetoric. Are these companies really in such bad shape? *edit: spelling

All of it is because investment in Q4 of last year was lower than any Q after 2012. Which is a ridicules reason given that Q3 was by far the highest ever. With that being said given the state of the public market (going down + low dividends) startups will still look sexy for a long time. I wouldn't worry about it.

"With that being said given the state of the public market (going down + low dividends) startups will still look sexy for a long time. I wouldn't worry about it."

This is such a ridiculous comment that it needs to be highlighted for just how myopic it really is.

Angel-and-after VC investment has been driven, increasingly, by the effects of ZIRP. "Fuck it, we don't have anywhere else to put our money, we might as well gamble on 23 red" is basically the prime justification for a lot of money that's been put into, say, companies that deliver lunches in San Francisco.

Now that we are moving away from ZIRP, sinking money into glorified AWS-React-Node applications is going to dry up, naturally. There are huge institutional investors who will no longer be willing to take the risk, period.

The "state of the public market" is getting hammered by oil prices, and by China. I don't know how you read that as "startups will still look sexy". The roulette table looks sexy when the bank isn't giving your savings account any return. The moment it does, guess what happens.

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

#52

Post by yggydrasily »

ewindisch wrote: post #42

It's been argued that the deal structure of companies, particularly unicorns, has begun to look like debt[1]. Low interest rates and easy money has created debt. Massive bubbling amount of debt. Crashing debt bubbles is not fun, just ask anyone that lost their shirt in 1929. There is a paper[2] from this past June that goes deep into this, highlighting how and why debt bubbles are so dangerous. TL;DR? At least checko…

But if we just keep interest rates low / near-zero forever, then we can keep inflating the debt bubble forever too! Problem solved!

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

#54

Post by auntienomen »

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…

$10-25M: Goblin $25-50M: Elf $100-500M: Centaur

Please let this catch on.

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

#55

Post by npizzolato »

exw wrote: post #35
genericresponse wrote: post #22

Earlier quoted context omitted.

Flipping through the list, my top 3 are Palantir, Spotify, and Zenefits. I think Uber or Airbnb will stay and become huge, but they might both be overvalued.

I don't think you are viewing this through the right lense. Valuations are a point in time vs. thinking about a company as a long-term investment - you should more think about which of these businesses has the best long-term potential to become the winner in a massive market, with a strong "moat" that makes it hard to compete, as well as extraordinary margins. Based on that criteria, Uber & AirBnB should be on top of…

I'm not going to speak to their ability to become winners in massive markets, but I don't see how Uber or AirBnB have a strong moat that makes it hard to compete. Both seem extraordinarily easy to switch away from to a competitor. Many drivers already drive for both Uber and Lyft at the same time, and it's very easy for consumers to use both apps. I haven't used AirBnB, but it seems like it would be easy to list your apartment/house on multiple marketplaces.

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

#56

Post by cableshaft »

frik wrote: post #26

What are the best books about the 2000 dot-com bubble?

Might want to start writing the book on the 2016 unicorn dehornification, since it seems the powers that be are pretty determined to make it happen (or at least getting all the media outlets to make people think it's about to happen).

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

#57

Post by pfarnsworth »

jpmattia wrote: post #32

Having had a front row seat to the popping bubble in 2000: I can't think of a single instance where wash-outs (which is really what is being described in the article) led to a wonderful outcome for employees. Any other old-timers around that can name any?

Most companies got hit hard, but the ones that survived have all thrived since then. It was definitely an extinction-level event for 90%+ startups it not more, and I think something similar will occur in 2016.

It will be interested to see how many of the YC companies survive 2016.

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

#58

Post by [deleted] »

yggydrasily wrote: post #52
ewindisch wrote: post #42

It's been argued that the deal structure of companies, particularly unicorns, has begun to look like debt[1]. Low interest rates and easy money has created debt. Massive bubbling amount of debt. Crashing debt bubbles is not fun, just ask anyone that lost their shirt in 1929. There is a paper[2] from this past June that goes deep into this, highlighting how and why debt bubbles are so dangerous. TL;DR? At least checko…

But if we just keep interest rates low / near-zero forever , then we can keep inflating the debt bubble forever too! Problem solved!

[deleted]

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

#59

Post by ChuckMcM »

ewindisch wrote: post #42

It's been argued that the deal structure of companies, particularly unicorns, has begun to look like debt[1]. Low interest rates and easy money has created debt. Massive bubbling amount of debt. Crashing debt bubbles is not fun, just ask anyone that lost their shirt in 1929. There is a paper[2] from this past June that goes deep into this, highlighting how and why debt bubbles are so dangerous. TL;DR? At least checko…

I agree with it being more debt like and less equity like. And when a new investor re-writes the term sheet such that their liquidation preference is satisfied ahead of everyone else, it is just like having the bond issuer return pennies on the dollar for net negative return. And if you're looking at a $100M write off, that can fund quite a few lawyers prior to leaning back for that hair cut.

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

#60

Post by abakker »

auntienomen wrote: post #54
kzhahou wrote: post #11

Earlier quoted context omitted.

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…

$10-25M: Goblin $25-50M: Elf $100-500M: Centaur Please let this catch on.

I'd really enjoy "wizard" to be the graduated rank, like when you're officially huge and profitable. Then, iOS/Android dispute becomes a wizard battle.
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