Why you should care

Because we hate to break it to you, but unicorns aren’t real. 

Take heed, hunter-investors: Sometimes a unicorn is just a horse — with a flimsy horn strapped to its head.

We’re not exaggerating when we say that nearly every startup wants to become a unicorn, aka a private company worth a billion dollars or more. As the fairy tale goes, these unicorns roam a wonderland reserved for businesses with nine-figure valuations, bask in the glory of bigger and better seed rounds and live happily ever after. But the pressure to attract big bucks over happy customers can lead to a dangerous steeplechase. So, before we all get trampled, it’s time to reign in the tech industry’s most revered creature. In other words, stop trying to be a unicorn. It takes much more finesse and finagling to become the next Google or Facebook.

When the term unicorn was used by a venture capitalist in a 2013 blog post, she counted only 39 of them. Less than three years later, there are 154, according to CB Insights’ venture capital angel investment database, with 1.3 new sightings every week. For startups, it’s never been easier to reach this scale of growth — but it’s never been harder to maintain it.

As far as unicorn ambitions go, there’s just too much “false hope” involved, says Mimi Evans, a financial specialist at Fast Turtle Ventures. “Wantrepreneurs” start out spending too much while earning too little, hoping to hit the jackpot with a flashy IPO or a lucrative acquisition by a tech titan. But “all the big buzz just creates a false sense of security,” adds Evans. After all, that lump of Series A funding isn’t burning a hole through your pocket.

Granted, making noise is what attracts the investors’ attention in the first place — because if you don’t build it, they definitely won’t come, says Ben Parr, a venture capitalist and author of Captivology: The Science of Capturing People’s Attention. But even worse is when startups neglect the fundamentals, like customers and cash flow, and burn out long before they get anywhere. “You have to keep expectations in check,” says Parr. There’s no need to be a startup steamroller right off the bat. Plus, there are other, and more modest, exit strategies to consider, like playing it safe with less buzz but more secure acquisitions in the private market.

After working for a big-shot company for more than a decade, Evans says she wasted years of her life “drinking the Kool-Aid.” Sadly, you can’t be a unicorn without flying too close to the sun. You’ll just be left with melted wings.

Comment

OZYImmodest proposal

Propositions that fall on the continuum between controversial and utterly insane. Sometimes we're tongue-in-cheek. Sometimes, dead serious.