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The worst kept secret in Silicon Valley is that 90+% of the so called 'unicorns' are just donkeys with a plastic cone on their head. It long since stopped bein

The worst kept secret in Silicon Valley is that 90+% of the so called 'unicorns' are just donkeys with a plastic cone on their head. It long since stopped being about innovation and disrupting markets and became mostly about shuffling piles of imaginary units around so a select few could get rich. Sadly the pawns in this whole game will be all the employees holding options that are soon to be worthless... and who were convinced to take those options in exchange for taking a proper cash salary. The only good thing this time around is that (unlike the last big Silicon Valley implosion) most of these companies are still private. So it will be really messy for some private investors and the greater San Francisco area is going to have a mess on its hands, but the broader US economy isn't going to get impacted as much. The stock market of 2015 also isn't propped up by bloated tech stocks in the way it was in 1999-2000.

deelowe 11y ago
Do you have any data to support these statements? This reads as FUD as-is. Not saying that's the case, I'm not in the startup scene per se, but on the face of it, this seems overly pessimistic.
- hueving 11y ago
  Data to support what? It's well known that common stock gets wiped out in any kind of devaluation.
  - deelowe 11y ago
    The OP is suggesting there is a trend of sorts. My interpretation is that she/he is suggesting there is something akin to a "pump and dump" scheme going on in SV right now. That's a bold accusation. I've not seen evidence of this, but perhaps I'm missing something here. What I have seen evidence of is a slowing economy and a shift towards more conservative investments. It happened in the early 2000s, in 2008, and it seems to be happening now.
    - gmarx 11y ago
      Pump and dump implies that it is being done on purpose. I think what we have here is a kind of functional pump and dump. Most or at least many of the participants are sincere but there are some who get paid either way. They are just siphoning off some of the cheap money all the central banks have been printing
- tayo42 11y ago
  To me, it seems like some people are looking forward and are excited about a silicon Valley collapse.
  - code4tee 11y ago
    Excited might not be the right word, but there's no question a lot of people are encouraged to see this happening. That's not schadenfreude but rather for the tech sector to have long term health and innovation built around solid businesses with real revenues and profits the silliness of the last few years needs to stop.
  - w1ntermute 11y ago
    It will have a cleansing effect for our ecosystem, much as forest fires do for theirs. The arrogance and irrational exuberance that has become commonplace among founders and VCs will be curtailed, and rent & traffic may become somewhat manageable.
    - kasey_junk 11y ago
      And lots of engineers will be out of work (or working for much less pay, in much more traditional organizations)...at least if the last bubble pop is any indication.
      - w1ntermute 11y ago
        Which is certainly unfortunate, but it has to happen sooner or later. The whole "STEM shortage" hysteria (see FWD.us[0]) is nothing more than a shameless attempt to drive down engineering wages by increasing enrollment in CS programs, pumping up H1B allocations, and wage fixing[1]. Tech execs and investors love to complain about having to pay six figure salaries to the engineers doing all the real work, all while carting home hundreds of millions themselves in just severance pay[2], despite running companies into the ground, often because of their inability to perform basic management tasks correctly[3,4,5]. 0: http://www.fwd.us/ http://www.fwd.us/ 1: https://pando.com/2014/01/23/the-techtopus-how-silicon-valleys-most-celebrated-ceos-conspired-to-drive-down-100000-tech-engineers-wages/ https://pando.com/2014/01/23/the-techtopus-how-silicon-valle... 2: http://www.usatoday.com/story/money/markets/2015/12/04/marissa-mayer-severance-benefits/76781384/ http://www.usatoday.com/story/money/markets/2015/12/04/maris... 3: http://nypost.com/2016/01/18/marissa-mayers-job-safety-joke-doesnt-sit-well-with-workers/ http://nypost.com/2016/01/18/marissa-mayers-job-safety-joke-... 4: http://www.businessinsider.com/eric-jackson-slams-yahoo-for-polyvore-acquisition-2015-12 http://www.businessinsider.com/eric-jackson-slams-yahoo-for-... 5: https://www.atlantic.net/blog/how-elon-musk-ceo-of-telsa-motors-stole-my-car/ https://www.atlantic.net/blog/how-elon-musk-ceo-of-telsa-mot...
w1ntermute 11y ago
> It long since stopped being about innovation and disrupting markets and became mostly about shuffling piles of imaginary units around so a select few could get rich. As someone mentioned on another thread a day or two ago, just look at the latest YC batches, particularly the IT companies. They're largely "X for Y" sorts of companies that already have significant traction. It's unlikely that the Airbnb founders would be able to get into YC in 2016. > Sadly the pawns in this whole game will be all the employees holding options that are soon to be worthless... and who were convinced to take those options in exchange for taking a proper cash salary. And on the other side, once the bubble bursts and the options are exposed as worthless at many of these companies, it's going to be much harder for startups to recruit employees with equity compensation, which will only make it more difficult to control burn rates.
- donkeyd 11y ago
  Which seems like a good thing to me, because then maybe, just maybe, startups with steady revenue growth will get funded again.
  - w1ntermute 11y ago
    Exactly - good entrepreneurs/companies can raise money and hire employees in any capital climate. It's the companies that lack basic building blocks, like a mission that resonates with employees on a non-financial level and sustainable sources of revenue, that will go under. Square is a great example of a company that people joined for all the wrong reasons. Not only are they incredibly unfocused when it comes to their mission, products and customer base, but the people joining it seemed to be doing so out of a mercenary instinct triggered by an expectation that Jack's second company would of course be a hit.
    - scurvy 11y ago
      Just like Andreesen's second company was destined to be a hit. Ex Loudclouder here. I'd say 90% of us were there for that reason.
thrownaway2424 11y ago
This site exists to worship the imaginary money shufflers. It was established by the same.
blantonl 11y ago
The worst kept secret in Silicon Valley.... I would argue this is the best kept secret, because this flush out needs to occur to wash away all the so called disrupters who, as you put, are really just shuffling piles of money around instead of actually doing any innovation. I hate to invoke schadenfreude here, but the past few years have been incredibly insulting to those of us who have been running highly profitable bootstrapped businesses, and so I eagerly await this flush. Picture Mr. Burns from the Simpsons tapping his fingers together.
- malchow 11y ago
  Like you, I am a co-owner of a bootstrapped, profitable, conservatively managed technology company. I am happy to have built what I have. But I can't find a whit of pleasure at the prospect of a disastrous reversal in private technology financing. There are a lot -- a lot -- of bad deals receiving favorable financing from out-of-touch or non-traditional institutionals. That's true. And painful but non-combustive reversals are part of the functioning of markets, sure. But SV remains the one place in the world where smart investors with genuine science and technology backgrounds are willing to play the long game with entrepreneurs. I spend a lot of time in London and New York. The generally hidebound nature of their investment cultures, which make perfect sense when you're doing an Exotic Pet Vet Tax-Free Rollup, or a Midwest Refrigerated Storage Debt-Chummed Dividend Fête, would never have made a bet on Google, Oracle, Nvidia, PayPal, Oculus, to take a few at random. So while there are a good dozen $1b liquidation preference-cap companies that are fundamentally silly, wishing for a tidal reversal in private tech funding isn't a good idea. VC qua asset class is important.
  - deleted 11y ago
    [deleted]
  - e40 11y ago
    Why I want the bubble to burst: I can't afford to pay Google, et al and unicorn salaries. My bootstrapped, profitable, conservatively managed company isn't swimming in cash. 10 years ago the pay we offered was competitive, but now... salaries (+ benefits) have gone through the roof.
Spooky23 11y ago
I think the definition of Unicorn doesn't work -- it made sense when it was Uber, AirBnb, Dropbox and a few others. But when a dead man walking MDM vendor like Good is a "unicorn" that is subsequently purchased by a zombie like BlackBerry, something is wrong. Even some of the more legit "unicorny" companies like Dropbox have issues. I've been a happy user of Dropbox for many years, but they refuse to provide a service offering that I can actually justify paying for in my personal life. And while they have an awesome service, they refuse to make the security investments that would allow my employer (who desperately needs a good solution in the space) to give them money. Anecdotally, I've found a few people with the same takeaway -- they want to give them money, but can't justify it at home or deal with service gaps in a business settings.
- boomzilla 11y ago
  Can you share the requirements that you employer needs? Box has been trying to get into enterprise for a long time, and has many 'enterprise' features, but we all know how well Box is doing financially. I think the problem with Box is "it's just a feature, not a product", especially in the presence of other alternatives like One Drive, Google Drive, Amazon Drive and what not. It might be a feature done better than the others, but it's not a product by itself to be bought in a stand alone package. There is no differentiation, actually it's even worse as I can't edit my documents unlike with Google/MS. Pricing is definitely not better than any of the competitors.
  - Spooky23 11y ago
    We have a lot of compliance requirements that I'd rather not get into. In general, the FedRAMP Moderate baseline is where we start, and depending on what/who the data/users are we may add more requirements. OneDrive claims to do this at the service level, but the implementation is poor and the controls aren't very robust when you implement. (Unless you buy Azure AD and double the cost or wait for their rewritten sync engine) Google & Box (although Box wants a high premium $$) are a lot better, but Dropbox is still best in class for sync. In some cases, we are forced to throw features away. For example, we have some users where a solution that encrypts data, limiting editing & search capability is a requirement for some information. Beyond that, a broader concern that would be of interest to me would be narrowing the scope of some of Dropbox's features like dedupe and "forever" files. (It's been awhile since I looked, so this may have changed) I would prefer a solution where there was a key isolating our data from other data in the Dropbox cloud. (bonus points if we controlled that key) That way, nobody outside of our enterprise would have a way to know if a specific piece of information was already uploaded to Dropbox. To me, it's great tool for a single person or a team of 8-25 people. It's missing stuff and is expensive for a real big org, and doesn't scale low enough for a family. (at least at a price that I'm willing to pay)
trafnar 11y ago
Do you think unicorns are paying lower than market salaries?
- tosseraccount 11y ago
  What ever the price paid is the market.
tosseraccount 11y ago
Good points. Why aren't there more publicly traded "Venture Capital" firms? Transparency, investor scrutiny and ability to vote out the board is good thing. Silicon Valley would benefit by having good old fashioned one share, one vote governance
eevilspock 11y ago
If the web were not funded by advertising, these hollow-corns could never exist. Advertising is arthritis to the invisible hand. It's utter bullshit that advertising is good for the web because it gives us stuff "for free": https://news.ycombinator.com/item?id=7485773 https://news.ycombinator.com/item?id=7485773
trhway 11y ago
>The worst kept secret in Silicon Valley is that 90+% of the so called 'unicorns' are just donkeys with a plastic cone on their head. that isn't a secret, that is a celebrated strategy of "fake it until you make it"

deelowe 11y ago

Do you have any data to support these statements? This reads as FUD as-is. Not saying that's the case, I'm not in the startup scene per se, but on the face of it, this seems overly pessimistic.

hueving 11y ago
Data to support what? It's well known that common stock gets wiped out in any kind of devaluation.
- deelowe 11y ago
  The OP is suggesting there is a trend of sorts. My interpretation is that she/he is suggesting there is something akin to a "pump and dump" scheme going on in SV right now. That's a bold accusation. I've not seen evidence of this, but perhaps I'm missing something here. What I have seen evidence of is a slowing economy and a shift towards more conservative investments. It happened in the early 2000s, in 2008, and it seems to be happening now.
  - gmarx 11y ago
    Pump and dump implies that it is being done on purpose. I think what we have here is a kind of functional pump and dump. Most or at least many of the participants are sincere but there are some who get paid either way. They are just siphoning off some of the cheap money all the central banks have been printing
tayo42 11y ago
To me, it seems like some people are looking forward and are excited about a silicon Valley collapse.
- code4tee 11y ago
  Excited might not be the right word, but there's no question a lot of people are encouraged to see this happening. That's not schadenfreude but rather for the tech sector to have long term health and innovation built around solid businesses with real revenues and profits the silliness of the last few years needs to stop.
- w1ntermute 11y ago
  It will have a cleansing effect for our ecosystem, much as forest fires do for theirs. The arrogance and irrational exuberance that has become commonplace among founders and VCs will be curtailed, and rent & traffic may become somewhat manageable.
  - kasey_junk 11y ago
    And lots of engineers will be out of work (or working for much less pay, in much more traditional organizations)...at least if the last bubble pop is any indication.
    - w1ntermute 11y ago
      Which is certainly unfortunate, but it has to happen sooner or later. The whole "STEM shortage" hysteria (see FWD.us[0]) is nothing more than a shameless attempt to drive down engineering wages by increasing enrollment in CS programs, pumping up H1B allocations, and wage fixing[1]. Tech execs and investors love to complain about having to pay six figure salaries to the engineers doing all the real work, all while carting home hundreds of millions themselves in just severance pay[2], despite running companies into the ground, often because of their inability to perform basic management tasks correctly[3,4,5]. 0: http://www.fwd.us/ http://www.fwd.us/ 1: https://pando.com/2014/01/23/the-techtopus-how-silicon-valleys-most-celebrated-ceos-conspired-to-drive-down-100000-tech-engineers-wages/ https://pando.com/2014/01/23/the-techtopus-how-silicon-valle... 2: http://www.usatoday.com/story/money/markets/2015/12/04/marissa-mayer-severance-benefits/76781384/ http://www.usatoday.com/story/money/markets/2015/12/04/maris... 3: http://nypost.com/2016/01/18/marissa-mayers-job-safety-joke-doesnt-sit-well-with-workers/ http://nypost.com/2016/01/18/marissa-mayers-job-safety-joke-... 4: http://www.businessinsider.com/eric-jackson-slams-yahoo-for-polyvore-acquisition-2015-12 http://www.businessinsider.com/eric-jackson-slams-yahoo-for-... 5: https://www.atlantic.net/blog/how-elon-musk-ceo-of-telsa-motors-stole-my-car/ https://www.atlantic.net/blog/how-elon-musk-ceo-of-telsa-mot...

w1ntermute 11y ago

> It long since stopped being about innovation and disrupting markets and became mostly about shuffling piles of imaginary units around so a select few could get rich. As someone mentioned on another thread a day or two ago, just look at the latest YC batches, particularly the IT companies. They're largely "X for Y" sorts of companies that already have significant traction. It's unlikely that the Airbnb founders would be able to get into YC in 2016. > Sadly the pawns in this whole game will be all the employees holding options that are soon to be worthless... and who were convinced to take those options in exchange for taking a proper cash salary. And on the other side, once the bubble bursts and the options are exposed as worthless at many of these companies, it's going to be much harder for startups to recruit employees with equity compensation, which will only make it more difficult to control burn rates.

donkeyd 11y ago
Which seems like a good thing to me, because then maybe, just maybe, startups with steady revenue growth will get funded again.
- w1ntermute 11y ago
  Exactly - good entrepreneurs/companies can raise money and hire employees in any capital climate. It's the companies that lack basic building blocks, like a mission that resonates with employees on a non-financial level and sustainable sources of revenue, that will go under. Square is a great example of a company that people joined for all the wrong reasons. Not only are they incredibly unfocused when it comes to their mission, products and customer base, but the people joining it seemed to be doing so out of a mercenary instinct triggered by an expectation that Jack's second company would of course be a hit.
  - scurvy 11y ago
    Just like Andreesen's second company was destined to be a hit. Ex Loudclouder here. I'd say 90% of us were there for that reason.

thrownaway2424 11y ago

This site exists to worship the imaginary money shufflers. It was established by the same.

blantonl 11y ago

The worst kept secret in Silicon Valley.... I would argue this is the best kept secret, because this flush out needs to occur to wash away all the so called disrupters who, as you put, are really just shuffling piles of money around instead of actually doing any innovation. I hate to invoke schadenfreude here, but the past few years have been incredibly insulting to those of us who have been running highly profitable bootstrapped businesses, and so I eagerly await this flush. Picture Mr. Burns from the Simpsons tapping his fingers together.

malchow 11y ago
Like you, I am a co-owner of a bootstrapped, profitable, conservatively managed technology company. I am happy to have built what I have. But I can't find a whit of pleasure at the prospect of a disastrous reversal in private technology financing. There are a lot -- a lot -- of bad deals receiving favorable financing from out-of-touch or non-traditional institutionals. That's true. And painful but non-combustive reversals are part of the functioning of markets, sure. But SV remains the one place in the world where smart investors with genuine science and technology backgrounds are willing to play the long game with entrepreneurs. I spend a lot of time in London and New York. The generally hidebound nature of their investment cultures, which make perfect sense when you're doing an Exotic Pet Vet Tax-Free Rollup, or a Midwest Refrigerated Storage Debt-Chummed Dividend Fête, would never have made a bet on Google, Oracle, Nvidia, PayPal, Oculus, to take a few at random. So while there are a good dozen $1b liquidation preference-cap companies that are fundamentally silly, wishing for a tidal reversal in private tech funding isn't a good idea. VC qua asset class is important.
- deleted 11y ago
  [deleted]
- e40 11y ago
  Why I want the bubble to burst: I can't afford to pay Google, et al and unicorn salaries. My bootstrapped, profitable, conservatively managed company isn't swimming in cash. 10 years ago the pay we offered was competitive, but now... salaries (+ benefits) have gone through the roof.

Spooky23 11y ago

I think the definition of Unicorn doesn't work -- it made sense when it was Uber, AirBnb, Dropbox and a few others. But when a dead man walking MDM vendor like Good is a "unicorn" that is subsequently purchased by a zombie like BlackBerry, something is wrong. Even some of the more legit "unicorny" companies like Dropbox have issues. I've been a happy user of Dropbox for many years, but they refuse to provide a service offering that I can actually justify paying for in my personal life. And while they have an awesome service, they refuse to make the security investments that would allow my employer (who desperately needs a good solution in the space) to give them money. Anecdotally, I've found a few people with the same takeaway -- they want to give them money, but can't justify it at home or deal with service gaps in a business settings.

boomzilla 11y ago
Can you share the requirements that you employer needs? Box has been trying to get into enterprise for a long time, and has many 'enterprise' features, but we all know how well Box is doing financially. I think the problem with Box is "it's just a feature, not a product", especially in the presence of other alternatives like One Drive, Google Drive, Amazon Drive and what not. It might be a feature done better than the others, but it's not a product by itself to be bought in a stand alone package. There is no differentiation, actually it's even worse as I can't edit my documents unlike with Google/MS. Pricing is definitely not better than any of the competitors.
- Spooky23 11y ago
  We have a lot of compliance requirements that I'd rather not get into. In general, the FedRAMP Moderate baseline is where we start, and depending on what/who the data/users are we may add more requirements. OneDrive claims to do this at the service level, but the implementation is poor and the controls aren't very robust when you implement. (Unless you buy Azure AD and double the cost or wait for their rewritten sync engine) Google & Box (although Box wants a high premium $$) are a lot better, but Dropbox is still best in class for sync. In some cases, we are forced to throw features away. For example, we have some users where a solution that encrypts data, limiting editing & search capability is a requirement for some information. Beyond that, a broader concern that would be of interest to me would be narrowing the scope of some of Dropbox's features like dedupe and "forever" files. (It's been awhile since I looked, so this may have changed) I would prefer a solution where there was a key isolating our data from other data in the Dropbox cloud. (bonus points if we controlled that key) That way, nobody outside of our enterprise would have a way to know if a specific piece of information was already uploaded to Dropbox. To me, it's great tool for a single person or a team of 8-25 people. It's missing stuff and is expensive for a real big org, and doesn't scale low enough for a family. (at least at a price that I'm willing to pay)

trafnar 11y ago

Do you think unicorns are paying lower than market salaries?

tosseraccount 11y ago
What ever the price paid is the market.

tosseraccount 11y ago

Good points. Why aren't there more publicly traded "Venture Capital" firms? Transparency, investor scrutiny and ability to vote out the board is good thing. Silicon Valley would benefit by having good old fashioned one share, one vote governance

eevilspock 11y ago

If the web were not funded by advertising, these hollow-corns could never exist. Advertising is arthritis to the invisible hand. It's utter bullshit that advertising is good for the web because it gives us stuff "for free": https://news.ycombinator.com/item?id=7485773 https://news.ycombinator.com/item?id=7485773

trhway 11y ago

>The worst kept secret in Silicon Valley is that 90+% of the so called 'unicorns' are just donkeys with a plastic cone on their head. that isn't a secret, that is a celebrated strategy of "fake it until you make it"