The Pursuit of Unicorns Is Ripping the Soul Out Of Entrepreneurship
Great entrepreneurs do not try to create unicorns. They try to solve a nagging problem or turn an industry upside down to improve it.
When we overuse a special object we admire, it becomes trite. Worse, it can lose its meaning. If you wore a wedding dress every day instead of once in your life, it would lose its uniqueness and value. Worse yet, it – and perhaps marriage with which it is associated – would become trite. If I have special dishes I use only on the Sabbath, the dishes and the Sabbath are enhanced by that sui generis usage and bond between object and subject. The Sabbath and the wedding are the special part. The object is merely a reflection of it. Therefore, it is even more troubling when the object – the wedding dress or dishes – becomes the goal and the marriage or Sabbath becomes secondary.
The same is now true of Aileen Lee’s unicorns. When Aileen introduced the Unicorn to journalists’ and VCs’ lexicons she had a point: In order for VCs to generate returns, you need to build billion dollar plus exits but billion dollar exits are rare. I assume she used the term “Unicorn” because it has one horn representing the One Billion dollar mark and it is mythological and, hence, rare.
Quite unintentionally I believe, the now ubiquitous “unicorn” term is ripping the soul out of entrepreneurship. The billion dollar unicorn club is fast becoming the object of the pursuit and not the outcome of passionate innovation. This is doubly troubling. First, no great companies are born trying to become billion dollar companies. They are born to solve a core need, usually uniquely recognized or personally felt by the founders. Great companies are born from passion and desire to fix the world and not from financial pursuit. Second, by talking about unicorns incessantly, it trivializes the challenges and the uniqueness of character that both the startup and its entrepreneurs necessarily possess.
I was piqued this the other day by the following Inc. article entitled “How a New Wave of Tech Unicorns is Rising out of Israel,” that is proudly (yet dubiously in my mind) making the rounds on the Facebook page of many Israelis. The article goes on to say, “Fresh off the success of some of Israel’s first ever tech unicorns — Waze, Wix and ironSource among others–‘the startup nation’s‘ thriving tech-industry might be home to a new set of high-valued startups very soon.”
The article continues to lay out two companies and some investors in pursuit of unicorn status. This is not different from the now daily reports in the WSJ and Fortune of these formerly mythological unicorns becoming daily sightings globally as well as the objective of entrepreneurial pursuit.
The great entrepreneurs do not try to create unicorns. Wix, which I know intimately, did not start out asking how it could be a unicorn. It started out because Avishai and Gig could not build a good website for a startup they had in mind. Most recently, we backed Nexar because Eran and Bruno wanted to save lives by preventing car accidents. Uber launcged because Travis needed a car service, and taxis and car ownership is currently a broken model for societies. WeWork started because Adam Neumann dreamt of a community of creators and entrepreneurs helping each other succeed. In fact, I am not sure that Adam even knew what a billion dollars was when he started WeWork.
Now, I am not pollyannaish. We too are a venture capital fund that needs big outsized exits to create meaningful returns for our investors and we deeply believe that all of our passionate founders will reach commercial success. However, this is not what we are looking to fund nor is it unicorn seekers we are looking to partner with. We are not looking to invest in unicorns. We are looking to fund fanatical entrepreneurs who want to make a dent in the world by solving a problem they care about deeply. We are looking to fund innovators who, like Tony Fadell said in a recent TED Talk, will solve a nagging problem, turn an industry or market upside down and fix it to make it better for people.
The pursuit of the unicorn status is cheapening entrepreneurship. It is also creating bizarre funding rounds where the target is a $1 billion valuation so you can be called a unicorn and then later vaporized by quixotic preference structures in a “calcified cap table.” More troubling is that the attempt to become a “unicorn” confuses the goal with the potential outcome.
When we find out that the industry will revert to a mean of between only 3-6 billion dollar companies started a year as Aileen empirically showed, I hope that despite the obsessive association of start ups with unicorns, it will not dampen the pursuit of innovation. When that wedding dress becomes old and tattered (like the term Unicorn has grown long in the tooth) the wedding should still be magical. When my Sabbath dishes crack, the Sabbath is still inspiring. The same should be true for entrepreneurship. When many of the unicorns disappear back into Neverland because private late-stage valuations prove to be a myth as well, and when the term becomes a cheap, overused reminder of a flawed target, I want to invest the next day in the great entrepreneur who is just trying to fix a really nagging problem in this world.
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