The withdrawal of the WeWork coworking stock, whose estimated value dropped substantially from $ 47 billion to $ 10 billion overnight, shows that even in Silicon Valley, nothing is free, even if it sometimes doesn’t.
The founder of the Czech innovation studio Pixelmate Matyáš Mandík in his commentary reflects on the current startup situation, exorbitant valuations and so-called unicorns, companies whose value is more than a billion dollars, but in reality it is often just an empty concept.
One would say that startup is an easy way to wealth and fame
After all, look at all the Zuckerbergs, the Kalanics and other unfinished dusters. But startup – in spite of all the marketing luster currently associated with this term – is nothing miraculous. It is a normal start-up company whose path to success is paved with hard work.
If you ever feel that it is “re-started”, rightly so. Takeoffs are like stars in the sky. Every year, 100 million of them are generated worldwide. How is it possible? This is mainly because there is no comprehensive definition of startup. The concept itself appeared in connection with newly built companies back in 1976, but it became popular with the inflation of the Internet bubble in the second half of the 1990s.
The different definitions of the term carry different features of startup – from a newly established company through rapid growth, high scalability, technology focus or low start-up costs to higher business risk. But you will not find the only company that is called startup and meets all the criteria. Sometimes it may not even be a company, but just an idea.
It seems, however, that this very surname alone should conjure up success. To verify how this magic works in practice, try to list all the startups you have heard of. There will certainly not be a hundred million. And so these stars fall more and faster than those in the sky.
Hundreds of unicorns a year
What makes young companies unrealistic? Undoubtedly unicorns, companies whose private investors have already valued them for more than a billion dollars. The name according to a rare mythical animal was meant to express the uniqueness of the projects. In 2013, when the founder of Cowboy Ventures Aileen Lee came with him, it could be called not even 40 companies. It was 279 last March and there are 498 in TechCrunch this October.
But to be honest, most of them don’t have that value. One example for all: before he entered the Uber Exchange in May, he thought of $ 100 billion. Today it is staggering to historic lows and its share value is 49 billion, which is a company that does not own anything, is doing business on the edge of the law and is in constant danger that when regulators get mad, they just bite her tip, still a lot.
Rather than rare unicorns, these societies sometimes resemble rodents.
A unicorn, or rather a rodent?
Real success requires more than just drawing a bold check, and then living the life of a rock star flying a private jet around the world while paying its employees worthless shares. Valuation itself is, in fact, a fictitious and empty notion that says nothing about the actual state and potential of society. Just looks good.
The future success or even hope for success is decided by something that does not sound as sexy at all as an inflated and beautifully sounding valuation. It is a reasonable business vision that will lead the company where it will make money.
Profit matters
In our company we meet daily with founders who think they have everything – super idea, super people, super technology, super investors with super money. But they don’t have a business plan. And they have no idea how to make a profit in the end. Let alone when. And that matters.
The startup, which has the ambition to be listed on the stock exchange within a year, will be built in a completely different way, differently the startup, which wants a majority market share and other and other variants. The point is that startup / nestartup is the same as opening a pub. It takes cost, invent marketing, focus on the product, and realize that a healthy business must be profitable.
Despite the problems now brought to WeWork to the wider public, it does not seem that the venture capital gates will close. Thanks to low interest rates, money is cheap and investors’ appetites are large. If, in some respects, it reminds you of the eve of the .com bubble burst after 2000, you’re not far from the truth.
So if you feel that you have a unique idea in your head, don’t hesitate. But if you are serious about it, avoid megalomaniacal plans, consider the need for multimillion-dollar investment. Well, take those great articles on giant valuations and gigantic investments with ease. Does that make sense to you?
Also published on Medium.