The Most Important Advice I Could Give You About Unicorns
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Unicorns.
The most overused word in the technology industry today. And they aren’t even fucking real. That is how absurd things have gotten. No, I take that back. THIS is how absurd things have gotten:
“I have to raise at a billion-dollar valuation”
“Why? You don’t have the revenue or profit to support that valuation.”
“But if I don’t I won’t be able to recruit the best people in the market. And every great company is raising at north of a billion dollars now so I need to in order to compete.”
“Ok. Well, if you choose the price, I choose the terms.”
“Deal.”
I can’t make this shit up. Can it be that Silicon Valley (the HBO show) isn’t farcical enough?
Yet in every great farce there is a lesson to be learned. And here is one take away from this current behavior that you take to the bank … The Power of the Narrative.
In November of 2013 Aileen Lee of Cowboy Ventures coined the term “Unicorn Club” as it relates to billion-dollar startup companies. I’m sure she had no idea just how powerful that word and that concept would become. Fred Wilson immediately weighed in on her analysis, a meme was born and we were off to the races talking about “Unicorns.”
Are there enough unicorns? Are there too many unicorns? Is being a unicorn ambitious enough? Should there be decacorns? How many unicorns were created in the last year? Show me your unicorn. Honestly, just searching the term yield many results.
Describing things as “billion dollar companies” is accurate but not descriptive enough.
So here’s advice I give people all the time when they’re raising money. Narratives matter. Narratives are memorable. I’m not talking about raising money at a billion dollars. I’m talking about making your company memorable by describing it with a narrative that people will later remember.
Showing people your features or even your recent performance lacks context and won’t be memorable. Your business needs to be cast in a story that puts it into perspective.
Why is your market broken? Why is your solution 10x better? Why are you the unique person to solve this problem? Why is it a really big market? Why is it ready for disruption? Why is now the right time? How do you remain defensible?
It’s hard to get across all these concepts AND be memorable. Many entrepreneurs pitching err on the side of too much information. I try to remind people that raising money is about building rapport and you can’t build rapport wading through 60 pages of charts or showing 45 product features. You do it eyeball-to-eyeball in discussion.
You actually know this intuitively. You’ve all been to a presentation where you were overwhelmed with information and while you thought that lady was really smart you can’t remember anything about what she said the next day. Yet the guy before her who had really cool images on his deck and told a funny story — you can’t remember his whole thing either but you remember his story. And that picture of the cereal box with Obama O’s that he used to raise money.
You feel very unique when you pitch your business yet three weeks later when you follow up on your VC pitches each partner has probably seen 15–20 more companies in that time and while she remembers you, she can’t quite, exactly remember what was unique about you. Unless you nailed the narrative. Unless you told stories that were memorable.
I’ve blogged for years. But when I meet people for the first time they usually say to me, “next time we meet I will be a line.” I din’t set out to really make that narrative memorable — it just was. Or they’ll remind me of my common advice to take “50 coffee meetings.” Of course I could have said 52 coffee meetings (1 for each week since that was my metaphor) but I thought it would be less memorable.
Marc Andreessen will forever be remembered for “software is eating the world.”
Fred Wilson “Mobile First” amongst many other narratives he’s nailed.
Marc Benioff, “The End of Software” (Whatever the fuck that means. Since of course software isn’t dead. But by coining it, making a logo and repeating it Salesforce.com became associated with leadership in cloud, um, software.) Narrative at its finest.
And the thing about narratives is that they drive behavior in ways that are more powerful and profound than people readily acknowledge — for good and bad.
Entrepreneurs literally started asking for billion-dollar valuations just because the market is talking about unicorns. I know you don’t believe me but I promise you it’s true. Here is from a great report by Fenwick & West
“Attaining a unicorn valuation appears to be a goal of promising companies raising money, as 35% of the companies we analyzed had valuations in the $1–1.1 billion dollar range, indicating that the companies may have negotiated specifically to attain the unicorn level.”
The report also notes that 75% of mega financings are led by non-VCs. That could lead you to conclude that there’s more evidence that VC is being disrupted by outsiders. You’d be wrong. It’s just dealing with a market where certain investors are temporarily willing to invest at prices that exceed the underlying value of the assets. And they are driven by a narrative that valuable companies can only be more valuable in the future.
So the next time you hear about unicorns thing about how insanely rare it is that a term coined just 18 months ago by Aileen Lee in the context of describing billion-dollar companies has become so prevalent in today’s tech market. Now that you have a sense for how powerful a narrative done well can be … what will be the narrative that YOU tell when pitching your company? How will you stand out from the masses of other people pitching.
If you crack THAT then putting up with the nauseating behavior in today’s market would have been worth it.
