“Unicorn” companies are those that reach the magically perceived $1-billion valuation level before they even have an initial public offering. Bill Gurley has made a mint from investing in some of them, including Uber and Snapchat. Since the term was coined in 2013, the number of unicorns has risen to 80 from 39, Fortune calculated.
But he warned in a keynote address at the SXSW tech-music-marketing festival in Austin in March that Silicon Valley’s Golden Age could soon be over and that some of today’s biggest startups could go down with it.
Other startup investors wondered whether Gurley was being too alarmist, as some have observed in the past.
“I think there will always be things that become really big, and these things will have investors,” Mike Morin, chief operating officer of Start Garden, a $15-million startup-capital fund in Grand Rapids, Michigan, told Chief Executive. Yet “there will be bubbles,” because “there is not symmetry to their creation, but [these companies] come in seasons and cycles.”
In Austin, Gurley warned that “a complete absence of fear” in Silicon Valley had led venture-capital firms to take big risks on tech companies.
So, unicorn companies could face resistance in the markets in the near future. “I do think you’ll see some dead unicorns this year,” Gurley said.
Morin commented that, “in the past,” the creation of some unicorns has stemmed from “an insiders’ game and the ability to buy emerging markets. But connectivity and transparency is making that harder.”
Fundamentally, Morin said, “companies don’t have to be unicorns to be great, and you can kill a great company by trying to insist it become a unicorn.”
Venture investors who want to succeed, he said, should always “invest in big markets, solid business fundamentals and smart founders with character—you know, the stuff we learned in kindergarten.”