ROAR I NG 2020s THE
In the final months of the decade, the unicorn market suffered the ultimate indignity.
The Slaughter of the Unicorns
suddenly the founders, not the investors, were the ones holding all the cards. The traditional playbook has early investors – that is, venture capital firms – cash out their investment for a huge windfall via an IPO. As the 2010s pulled to a close, we've seen an unusual reversal of the traditional exit strategy. As it turns out, the public markets are not interested in paying Silicon Valley prices for bubbly, cash-gorged unicorns with lousy business models. Since 2017, 11 venture-backed unicorns have gone public. Collectively, this group generated around $12 billion in revenues in the year before their public debut... and burned through around $6 billion of cash flows in that year. No wonder the venture capital firms were ready to cut them loose! The public markets have not been kind to this herd of unicorns, with ride-sharing firms Lyft (LYFT) and Uber (UBER) among the worst performers (both down around 40% in the nine and seven months following their IPOs, respectively). In the final months of the decade, the unicorn market suffered the ultimate indignity... The public markets rejected the IPO of office- rental giant WeWork. That is almost unheard of. The message is clear: the public markets have little appetite for venture-backed unicorns.
BRYAN BEACH FINANCIAL ANALYST, CPA, AND FORMER "BIG FOUR" AUDITOR
T he 2010s will go down as the decade of the unicorn. If you're unfamiliar with the term, a "unicorn" is a privately-held company valued at more than $1 billion. Unicorns used to be rare. But in the 2010s, they started popping up everywhere. Fueled by cheap debt and Middle Eastern sugar daddies, there has been an arms race among venture capital firms like the SoftBank Vision Fund to invest as much money as possible, as quickly as possible, in any company with a cool logo and a remotely viable business model. The 2010s saw the term "Unicorn bubble" enter the financial lexicon – there's even a Wikipedia page describing the new phenomenon. How did this happen? Jacob Goldstein, host of Planet Money, nailed it when he pointed out that: "It used to be that startups competed to get money. Now money is competing to get to the startups." That's a very important distinction. With so much money sloshing around Silicon Valley,
American Consequences
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