Expect Some Unicorns to Lose Their Horns, and It Won’t Be Pretty • Hacker News Board

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

#61

Post by alextgordon » Fri, Jan 22, 2016, 8:38 PM UTC

mark242 wrote: post #51

mbdev wrote: post #41

Earlier quoted context omitted.

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…

I agree 100% with your analysis long-term, however it seems unlikely that interest rates will rise for the foreseeable future.

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

#62

Post by MrApathy » Fri, Jan 22, 2016, 8:41 PM UTC

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…

Spotify is not like Netflix. Spotify is solely dependent on content creators who know exactly how profitable Spotify is at any time, and therefore how far they can be squeezed for royalties.

Netflix has two major advantages: (1) consumers are far more likely to accept a limited video catalog than they are a limited music catalog, and (2) Netflix has spent a lot of money developing their own content. Could Spotify do the same? Possibly, but probably more difficult to do so.

I think Spotify will in the future generate consistent low profits, much like a utility, and their valuation will likely reflect that.

So agree with you completely.

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

#63

Post by paulpauper » Fri, Jan 22, 2016, 8:42 PM UTC

Haven't we been 'expecting' this since 2012, yet the biggest, most successful unicorns keep going up in value.

For all the hype and doom about Square stock, the price is back to where it was when it began trading a month ago, although it has fallen 20% in recent weeks.

But this is a good opportunity for employees to understand the risks of stock options, but it's not like the world is coming to an end. Such risks have always existed.

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

#64

Post by numbsafari » Fri, Jan 22, 2016, 8:52 PM UTC

davidw wrote: post #4

I expect 'unicorn' references to horns and such to be thoroughly worn out by the end of the year.

You mean by the end of January.

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

#65

Post by VLM » Fri, Jan 22, 2016, 9:22 PM UTC

frik wrote: post #26

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

I'm not sure anythings changed since Tom Standage's "The Victorian Internet".

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

#66

Post by sjg007 » Fri, Jan 22, 2016, 9:25 PM UTC

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…

Bond holders get paid before stockholders. But this is explosive debt.. E.g it has a liquidation preference.

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

#67

Post by sjg007 » Fri, Jan 22, 2016, 9:30 PM UTC

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

Are they overvalued? You are worth what someone will pay for you which either is based on what revenue you generate or what they believe you can sell for.

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

#68

Post by sjg007 » Fri, Jan 22, 2016, 9:32 PM UTC

chishaku wrote: post #50

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

> Can anyone really say if there is any proof to this rhetoric. Are these companies really in such bad shape? One thing is for sure, you can't look at companies/startups or VC in a vacuum. You'd be wise to look at financial markets as a whole and all the interdependent factors that __might__ be leading to a situation similar to 2008/9 or worse; another housing bubble, weakness in energy markets, banks exposure to hou…

Technically we don't know until the SEC filing. This is why IPOs become down rounds.

Sometimes a public ally traded institutional investor can shed light on a private companies value based on required public disclosures.

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

#69

Post by JonFish85 » Fri, Jan 22, 2016, 9:35 PM UTC

sjg007 wrote: post #67

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

Are they overvalued? You are worth what someone will pay for you which either is based on what revenue you generate or what they believe you can sell for.

That is true, but with the caveat that there are often terms to what investors pay. If I invest $1,000 for 0.000000000001% of your company, but with a requirement that I am repaid $2,000 in the event of a liquidity event (plus some participation), it's not really much of a risk for me: I'm "guaranteed" a 100% return. The valuation is somewhat meaningless in this situation, except maybe in terms of marketing.

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

#70

Post by SilasX » Fri, Jan 22, 2016, 9:40 PM UTC

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 can't really sympathize with startups affected by recent Fed movements. If you picked investors that actually care about a ~1% change in risk-free interest rates, well, I have a pull a Captain Hindsight here ...