So it was with some amusement that a few months ago a company I was planning on working with was referred to as a ‘Unicorn’.
I’m always troubled when a word is used in a context that completely flummoxes me.
It seems as though that phrase has not been around for very long and refers to companies that have a value in excess of $1billion – the so called Unicorn Club. I smiled and googled it up.
Apparently many in the investment community aspire to own one or more Unicorns. Odd choice of word I reckon – after-all a Unicorn is a mythical beast said to be a symbol of purity and grace, which could only be captured by a virgin. Moving swiftly on……. the next time I heard this phrase – now promoted to the radio, was as a part of a London Technology Week where the interviewer was asking why there were so many Unicorns in the US and so few in the UK. And that got me thinking as well.Why?
Well, firstly let’s look at what being worth a billion really means.
Let’s suggest you are ACME plc and you’re in Civil Engineering – you know the sort of thing – roads, railways, drainage system, bridges, ports etc. The sort of infrastructure that allows you to actually exist. Now let’s say your yearly revenues are $500m. Nice. But then you realise that the investment community doesn’t really like Civil Engineering, it’s just soooooo last year. So you get a 1x revenue multiplier, maybe 1.5x. So you’re not a unicorn. Now let’s say you have just invented an app that allows people to book a drone (called in your shiny marketing material a ‘hottie’) that carries you around all your favourite locals and flies you back home unconscious, but safe and sound, at the end of the evening. And you have a prototype, and have established a massive market and attracted some early advertising revenues, and maybe you even built an app for this year’s silly wearable trend and 100,000 people have downloaded it ready to shout your strapline ‘beam me up hottie’ at their tattooed wrists. Your revenue is 100k pa. Now that’s a Unicorn Calf if ever I saw one.
My point being that the Unicorn moniker is a representation of the hubristic tendencies of certain sorts in the investment community. And so it was no surprise that when I actually took a look at the pantheon of mythical creatures that make up the European Wing of the Hubristic Tendency I was not at all surprised to see business that help deliver curries, cheap cabs, gamblers, loan sharks, estate agents, apps that tell you what music you like, apps that allow you to upload music that you have no rights to and so on and so forth.
The thing is being a Unicorn is not necessarily an indicator that you have a proper business that will last the test of time.
But don’t get me wrong – there are also companies in there that I like, they might not be building bridges and ports – but they might, just might, change the world, maybe even a little bit for the better. The thing is, just like the last dotcom bubble – if these mythical creatures are still around in 10 year’s time they are the good ones, I just feel that there might be a big nasty market realist with a blunderbuss just walking into the enchanted forest about to return the unicorn to a horse with a dead nob on its head.
