每日跟讀#727: ‘Unicorns’ Learn A Hard Lesson:Profits Matter
Fred Wilson, a venture capitalist at Union Square Ventures, recently published a blog post titled “The Great Public Market Reckoning.” In it, he argued that the narrative that had driven startup hype and valuations for the past decade was now falling apart.
His post quickly ricocheted across Silicon Valley. Other venture capitalists, including Bill Gurley of Benchmark and Brad Feld of Foundry Group, soon weighed in with their own warnings about fiscal responsibility.
At some startups, entrepreneurs began behaving more cautiously. Travis VanderZanden, chief executive of the scooter startup Bird, declared at a tech conference in San Francisco last week that his company was now focused on profit and not growth.
The moves all point to a new gospel that is starting to spread in startup land. For the last decade, young tech companies were fueled by a wave of venture capital-funded excess, which encouraged fast growth above all else. But now some investors and startups are beginning to rethink that mantra and instead invoke turning a profit and generating “positive unit economics” as their new priorities.
The nascent change is being driven by the stumbles of some high-profile “unicorns” — the startups that were valued at $1 billion and above in the private markets — just as they reached the stock market.
The lackluster performances have raised questions about Silicon Valley’s startup formula of spending lots of money to grow at the expense of profits. (All of those companies lose money.) Public market investors, it seemed, just weren’t having it.
“A lot of these highly valued companies have run into the buzz saw of Wall Street, where they’re questioning or reminding us that profitability matters,” said Patricia Nakache, a partner at Trinity Ventures, a Silicon Valley venture capital firm.
She added that she anticipated a “ripple effect” on private startup valuations that would start with the largest, most valuable companies and trickle down to the smaller, younger ones.
Aileen Lee, an investor at Cowboy Ventures, a venture capital firm in Palo Alto, California, said she considered dusting off a four-year-old “winter is coming” email she had sent to startups in 2015, telling them to prepare for a downturn.
Other venture capitalists are being more forward. At Eniac Ventures, a venture firm in New York and San Francisco, the partners recently combed through their companies and identified the “gross margins” — a measure of profitability — for each one, said Nihal Mehta, general partner of the firm. This was not something the firm regularly looked at, he said, but they were inspired by Wilson’s cautionary blog post.
Source article: https://paper.udn.com/udnpaper/POH0067/346374/web/