Moving Beyond The Unicorn
The time has come, I believe, to move beyond the unicorn.
Over recent decades, it has become common cant that the purpose of venture capital is to create unicorns. The more unicorns a fund has, the better it is perceived to be.
Unicorns, of course, are mythological and rare and beautiful. That is why they are touted as the end-all-be-all of venture.
But should venture be about pursuing the rare, delicate, and beautiful? I don’t think so. We’re here to produce companies that create value that lasts.
Few things are as evanescent as unicorns, which has become painfully evident in today’s tough investment market. So many of the vaunted unicorns of recent history are turning out to be like piñatas: big, but tissue-paper thin. Easily broken. Mostly air. Their vaunted valuations, on close examination, are puffed up, not supported by revenue or profit. Even so, venture capital analysts, journalists, and other funds remain fixated on unicorn production.
I predict a massive collapse among unicorns in the months ahead. Being unsustainable, they’ll be hit hard by the proverbial piñata stick of reality, pop, and plummet.
We must break this cycle of toxic mythology. As investors, we need to recognize that our true purpose is supporting value that lasts, not that flares and fades like a gaudy sunset.
So — I propose we stop chasing unicorns.
Instead, let’s pursue a new ideal: creating companies, both over and under the random $1B in valuation, with sound fundamentals, driven by business models that work in the real world, delivering strong, growing revenue and sustainable profit. Over the long haul, these kinds of companies will help the world much more than those delicate, paper-thin unicorns. And they will help us deliver returns that are not only stronger, but more predictable and resilient in downtimes.
This is the name I suggest for our new north star: Tricents. This concept generates from a notion we talked about a lot back when I was at Softbank: a great company should dominate its market for 300 years, in other words, a tri-century. Let’s stop thinking so single-mindedly about size, and focus on endurance.
Let’s stop thinking so single-mindedly about size, and focus on endurance. How many companies in your portfolio have the potential to be Tricents?
By Managing Partner Mike Edelhart
@MikeEdelhart
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