StartUp Trends
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The Fantasy World of the Billion Dollar Club “I hope you're not busy for about a month...” – Man Stoner, “Up in Smoke,” Paramount, 1978 There was a time when a couple of late teen/early millenniums would get together, max out their credit cards, borrow from their parents and anyone who would listen to them, work (and sometimes sleep) in a garage and emerge with the next great idea. Not anymore. Now, they see what someone else has done; give it a new twist, new coat of lipstick, an incomprehensible name and trot off to Sandhill Road and/or other VC (venture capital) organizations around the globe to collect a few hundred million so they can start out in style. What are they worth? Billions. What have they “sold?” Well, they closed a few or dozen VC deals and have risen to the elite unicorn status. Isn’t entrepreneurship grand? Unicorn status was initially bestowed upon the category of firms valued at over $1B.
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Article from communication specialist about trends in financing start ups
Transcript of StartUp Trends
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TheFantasyWorldoftheBillionDollarClub
Ihopeyou'renotbusyforaboutamonth...ManStoner,UpinSmoke,Paramount,1978Therewasatimewhenacoupleoflateteen/earlymillenniumswouldgettogether,maxouttheircreditcards,borrowfromtheirparentsandanyonewhowouldlistentothem,work(andsometimessleep)inagarageandemergewiththenextgreatidea.Notanymore.Now,theyseewhatsomeoneelsehasdonegiveitanewtwist,newcoatoflipstick,anincomprehensiblenameandtrotofftoSandhillRoadand/orotherVC(venturecapital)organizationsaroundtheglobetocollectafewhundredmillionsotheycanstartoutinstyle.Whataretheyworth?Billions.Whathavetheysold?Well,theyclosedafewordozenVCdealsandhaverisentotheeliteunicornstatus.Isntentrepreneurshipgrand?Unicornstatuswasinitiallybestoweduponthecategoryoffirmsvaluedatover$1B.
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Today,thelowendis$10Bandentryintheclubwillprobablyriseto$100Binnotime.Andjustthink,wecancreditthisalltotheiNetthatspeedsinformationaroundtown,aroundtheglobeintheblinkofaneye.
GlobalContactTheInternetmayhavebeendesignedasameanstohelpengineers,academicsandscientiststoexchangeinformationmorerapidlybutithasquicklybecomethetoolofcommerceandthewayfolkscommunicateacrossthetable,acrosstownandacrossvastoceans.Innotime,youcanexchangenews,data,imagesbuy/sellgoodsandmakeafoolofyourselforinsult/abusepeopleyoudontevenknowwithaclickofthemouse.Itsfantastic.
Ifitwerentfortheused,abused,misusedInternettherewouldbeuttersilence.Instead,everyminute:10Madsaredisplayed500Ktweetsaresent7Mmessagessent3.5piecesofcontentshared100hoursofvideouploaded
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6.9MFacebookmessagessent$134KAmazonsalesmade1,572,877GBofIPdatatransferredAndintwoyears,therewillbe3xmoreconnectedthingsthanpeopleonEarth.Wellbedriving13xmoremobiletrafficanditwillallproducemorethan5ZB(Zettabytes)ofdatathathastobestored.WhenPedrowasaskedhowlongitwouldtake,hesaidAweek.Imeanaday.Aweekday.AllonthelowlyglobalbackboneandtechnologythattheUSgovernmentinitiallyfunded.Nowondereverygovernmentfeelsentitledtolisteninandseewhatsgoingon.Exceptfortheunderappreciatedhardware,softwareandserviceprovidersitsaregularmoneymakingmachine,sowhynotinvestbig!
Up,UpandAwayNewstartupsgetfundedalmosteverydaybecausetheyhaveanewidea,newwaytointerest/attractpeoplethatwillmakealloftheearlystageinvestors(andearlyemployees)amazinglyrichforonlyafewhundredmilliondollarsinvested.Fundsarerushingtogetonthetableearlybeforethestakesgoup.
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Ofcourse,notallofthemwillsurvivetogopublicbutVCsdontcare,whichiswhytheyinvestin10orsoofthesamething.Ifthecompanyburnsthroughthepaltry$40$80Mtooquickly,noproblemtheysimplygobackanddipintothemoneywellwithanevenbiggerideaandtheyregoodforanothercoupleofyears.Afterall,lookattheirvaluation.Besides,theyreprivatefirmssotheydonthavetoplaybythesamerulespubliccompanieshavewiththingslikequarterlyfilings,SEC(SecuritiesandExchangeCommission)documentslikeauditednumbersofrealusers(notdeceased,onetimers),realtraffic(notbots),revenuesandburnrate(howfastyouregoingthroughthestashofcash).Thatsoneoftheperksofbeingprivatevs.public.Youdonthavetotellthema****thingifyoudontwantto!Sofolkscanlettheirimaginationsgowildandtheydo.Beautyisintheeyeofthebeholder,sogetinbeforethissuckagoesballistic.NoneofthemheardManStonerswarning,Hey,heydon'ttakethose,man.Ofcourse,itmaynottakeoffbecausehistoryhasanuglywayofrepeatingitselfinbusiness.
ThatsSoYesterdayWhiletheindustrymayhaveexperiencedabubble/burstsituationafewyearsago,theresnoreasontothinktherapidadvanceofunicornfirmswillencounterthesamedisaster.Ofcourse,theresnoreasontothinkitwonthappenagaineither.
Backin19992000,wehadthisthingcalledthedot.combubble.
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Itwasabeautifulthingpixiedust,rainbowsandgoodtimesthatwouldgoonforever.Untiltheydidnt.Backinthosedays,peoplewerebettinghugesumsofmoneyonyoungcompaniesrunbyfolkswithnotrackrecordinbusinesswhofounditfunandeasytospendthechunksofcashpeoplegavethem.Talkingabouttodaysenvironmentbutsoundingalotlikethe90s,BillGurley,aVC,toldtheSXSW(SouthbySouthwest)folks,ThereisnofearinSiliconValleyrightnow.Acompleteabsenceoffear.Ofcourse,thereareentrepreneurswhodidnttaketheeasyroutetogettingtheirideasoffthegroundandgrowingtheirfirms.TakeDaymondJohn,ofSharkTank,andLarryOConnor,ofOWC.John,ofSharkTank,startedaclothinglinecalledFUBU(ForUsByYou)withasecondmortgageonthehouseheandhismothershared.HelikestolookatboringthingslikeCOG(costofgoods)andsales,marginsinsteadofnebulousnumberslikesomehowgettingonepercentofa$50Bmarket.Hedoesntthinktheideaofdropping$1Mon100untested/unprovencompaniesormanagementteamsisareallyswiftmove.Beinginlinewithcomparablesinthemarket(revenuesandspending)doesntmeanmuchwhenthemarketcorrectioncomesanditwillcome.Actually,hecallsitdumbmoney.Likemostsuccessfulentrepreneurstoday,bothJohnandOConnorhadanidea,believedinit,andfoundawaytomakeithappen.WhenhewastuningApplecomputersbackin1988,OConnorthoughtimprovingsystemswastooexpensiveandsomethingmostuserscoulddothemselveswiththerightstuff.HestartedOWC(OtherWorldComputing).inhisfolkskitchenandbarn.HecontinuedgrowingtheproductlinesfortheApple,AppleIIandbeyondsystems.Today,heandhisteamfocuseongoodproducts,customervalue,customerserviceandohyeah,retainedearnings.Fortunately,therearealotofgreatfirmslikeFUBUandOWCtodaythathavedeeprootsandresistthetemptationofthefast/easymoneyroute.Theyalwaysremembertheirfirstsale,theirfirstcustomerthatlaunchedthecompany.Privateorpublic,theyknowitsaboutthecustomer,notthedeeppocketfolks.PedrolookedatthequickandeasyVCfundedapproachandsaid,Kindalookslikeatoothpick.Ofcoursethereisanotherfactortoconsiderglobaleconomiccyclesthatoccurregularlyasmarketsadjusttotryandequalizesupplyanddemand.
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UpsnDownsSinceperhapsthebeginningoftimetherehasbeenanimbalanceinsupplyanddemandwhichheldswayoverthepriceofgoods,productsandservices.Excessdemandproduceshighercosts,higherprofitswhileexcessproductiondrivespricesandprofitsdown.Thatmaybewhytheyrecalledbusinesscycles.
Forexample,whentheresashortageoftechnologyproductsflashmemory,harddrives,CPUs(centralprocessingunits),GPUs(graphicprocessorunits),rareearth,younameit,demandandpricesgoup.Togettheirunfairshare,firmsrampuptheirproductiontotakeadvantageofthedemandandincreasedmargins.Thensuddenly,theresaglut.Pricesgodowntokeepthelinesrunningandmarginsdisappear.Ithappenswithalmostboringregularitybecauseitsaconstantguessinggameastowhatshot,whatsnot.
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Ofcoursethatwillneverhappenintherarifiedgamewereplayingtodayyouknow,giantsumsofmoney,skyhighvaluationsandeveryonelookingtoscorewiththenextblockbustercompany.Ohsure,forsomeitwillendbadlyandforscoresofothers,ithasbutmostassuredlynotwiththeoneyoureinortheoneyourmutualfundisinvestedin.Afterall,everyoneknowsunicornsdontreallyexist,sohowcouldtheydisappearordie?
BeautifulYes,weadmitunicornsdolookbeautifulinourdreamsbutunfortunately,atsomepointintimewehavetowakeup.Andwhenwedo,thepixies,mermaidsandunicornsdisappearsoasmuchaswedlikethemtoexist,weknowtheyreallydont.
ManStonerlookedatwhatwasgoingonandsaid,Ithinkwe'reparked.
