9 ms·

The wave of unicorn IPOs

117 points by wskinner 7y ago

wskinner 7y ago
The article is behind a paywall. By reloading the page and hitting escape before it fully reloads, you can still access the full text.
- RickS 7y ago
  https://outline.com/HwrgJ4 https://outline.com/HwrgJ4
- YjSe2GMQ 7y ago
  Off topic, but I recommend getting a subscription of The Economist. Totally worth the money, and the weekly format combined with an almost complete lack of bias gives a nice leisurely pace to catch up with world's events.
  - alasdair_ 7y ago
    Agreed. The Economist has a bias towards free markets and free press but they are clear on those points. They do a lot of things to stay as unbiased as possible, like avoiding attaching a single name to a byline for a story. Even Karl Marx read The Economist, for what it’s worth.
    - avarun 7y ago
      > They do a lot of things to stay as unbiased as possible, like avoiding attaching a single name to a byline for a story. I don't actually understand this. I personally find that following specific authors whose journalism I find of high quality is a lot more efficient use of my time than following publications. Why does The Economist make this needlessly difficult, and what's the benefit of doing so?
      - YjSe2GMQ 7y ago
        Matter of taste I suppose. It's more like Wikipedia than other modern journalism. Some journalists use pseudonyms, for example Banyan, Butterwood: https://www.italki.com/question/377016 https://www.italki.com/question/377016 Edit: I'd say it has the effect of reducing the impact of ego on writing.
      - human20190310 7y ago
        The benefit is that it allows the content of the articles to stand on their own merits, instead of involving the reputation of the author.
        alasdair_ 7y ago
        >The benefit is that it allows the content of the articles to stand on their own merits, instead of involving the reputation of the author. Exactly. Who emphasis should be on "is this true/ a good point?" over "is this someone I think I should agree with already?"
  - rorykoehler 7y ago
    The Economist has hardcore bias. Very neoliberal.
    - YjSe2GMQ 7y ago
      Not according to those guys: https://mediabiasfactcheck.com/the-economist/ https://mediabiasfactcheck.com/the-economist/ For example, they endorsed both Democratic and Republican candidates for president in the past.
      - rorykoehler 7y ago
        I'm just going by what I have read. My ex cofounder was subscribed so I read it quite a bit. Found it to be very biased neoliberal but then again I'm interested in ideas that fall way outside the Overton window of the democrat and republican political sphere. Democrat and Republican are essentially siblings. They're not that different in that they both aim to use capitalism and the power of the nation state military to exert influence and assert dominance.
- damian2000 7y ago
  It loaded for me ok, I'm using the Materialistic HN app on Android
- trystero 7y ago
  Or simply disabling JavaScript would have the same effect.
- username223 7y ago
  This seems like an increasingly common modern web pattern: load the article (no one cares about that), and all of the ads and trackers (which is what really matters), then use JavaScript to throw up a popover and do whatever you can to prevent people from using readability mode or killing the popup. I'm fine with paywalls, but if you want to charge money for what you write, then just do it. Don't waste my bandwidth for something I'm not supposed to see. Put up a login page or something.
jedberg 7y ago
Another article about tech IPOs pointed out that this year the number of public companies headquartered in San Francisco will double. Apparently there are only four now, and at year's end they expect nine.
- chx 7y ago
  If Lyft employees put their IPO cash into real estate, they could buy every for-sale home in San Francisco. From https://www.redfin.com/blog/lyft-ipo-san-francisco-real-estate/ https://www.redfin.com/blog/lyft-ipo-san-francisco-real-esta...
  - wavefunction 7y ago
    Buying every home is one thing but maintaining them too?
  - djcapelis 7y ago
    The people who IPO try that each time—that's why the prices are what they are.
- harryh 7y ago
  Existing Public Companies with SF HQs: - DocuSign - Dropbox - Eventbrite - Fitbit - LendingClub - LiveRamp - New Relic - Okta - Salesforce - Splunk - Square - Twilio - Twitter - Yelp - Zendesk - Zynga - Wells Fargo - Charles Schwab - First Republic - Pacific Gas & Electric - Gap - Williams-Sonoma - Dolby - McKesson (thx khuey; though apparently moving to Dallas soon) - Castlight Health IPOed This Year: - Stitch Fix - PagerDuty - Lyft - Pinterest - Levi Strauss (thx mykowebhn) Expected to IPO This Year: - Slack - Uber - AirBnB - DoorDash (maybe?) - Postmates (maybe?) - Instacart (maybe?) - Asana (maybe?) I'm sure I'm missing some.... EDIT: adding new ones as I/others think of them
  - khuey 7y ago
    McKesson
monocasa 7y ago
So what, does capital think there's a recession coming? Cashing out to become more liquid and becoming ready to gobble up foreclosures is what I'd be doing if that were the case.
- pas 7y ago
  Yet at the same time a lot of people invest in these very late stage startups. Why? Are they the fools of the stock market? Who usually buys at IPO time (besides the speculators that want to ride the early fluctuations)? There's an underwriter that does the whole IPO, sure, they are probably in the same bucket as those speculators, but to whom they unload all these new stocks? Individuals? A lot of big institutions that have some risk appetite? (But those are probably already limited partners in VCs, no?)
  - linuxftw 7y ago
    Fund managers buy this crap to cash out the VC friends. See SNAP for an example: [1]. Few actual people are stupid enough to fall for this shell game, but the limited 401k options most companies offer all but guarantee some of your savings is going into these deadbeat companies. 1: https://finance.yahoo.com/quote/SNAP/holders/ https://finance.yahoo.com/quote/SNAP/holders/
quickben 7y ago
I read this analysis that before the Dotcom bubble burst, unicorns cashed out in a similar fashion. The authors were proposing to watch for the next wave as an indicator, as VCs would be trying to cash at the best time (or at all) before a recession.
- hkmurakami 7y ago
  This hopefully shouldn't be a surprise for those looking to invest in the public stock market, given the ample amount of caution many participants have been expressing over the last 12+ months regarding our current status of being in the late stages of economic expansion.
  - pascalxus 7y ago
    This will be known as the everything bubble, everyone saw coming. I don't think anyone's going to be surprised when this melt down arrives. Though the length of recovery needed to bounce back will surprise people who haven't been watching the public/private US/Global deficits over the last 20 years.
    - aaronblohowiak 7y ago
      How are your assets currently allocated? I have 71% cash, bonds, and CDs. 20% equities, and the rest in private placements.
    - dehrmann 7y ago
      > This will be known as the everything bubble Not really; there isn't the irrational exuberance that the dot com, housing, or bitcoin bubbles had. There aren't stories about people getting rich quick, new normals, etc. > ...deficits over the last 20 years. You're onto something here. There's definitely been an increase in government spending. The other thing going on is that there was a lot of quantitative easing following 2000 and 2008. There's another word for everything going up: inflation. Maybe that's what we're seeing, but government inflation metrics are missing it for some reason.
olivermarks 7y ago
As Reid Hoffman of Greylock Partners, a venture-capital firm, and the co-author of a book about blitzscaling, puts it: “In a connected world, someone will build an Amazon. The only question is who and how.” '...what they also lack, in 11 cases out of 12, are profits. Today, according to Jay Ritter of the University of Florida, 84% of companies pursuing ipos have no profits. That is remarkably high. Ten years ago, the proportion was just 33%. To see profitlessness as rampant as today’s you have to go back to the peak of the dotcom boom in 2000.' I'm in the Bay Area and this late stage of the tech business cycle reminds me a lot of the build up to the dot com bust. for Enron see Theranos (and possibly even Tesla), along with lots of mega deals over basically profitless platform companies posturing around dominance of future markets...
- jypepin 7y ago
  I don't disagree, but it's been 10 years that we keep hearing that "<insert something> are now showing that the dot com burst is coming again"
  - z3t4 7y ago
    Bubble bursts are entirely speculative. When people think the bubble have burst or are about to burst, that's when it will burst.
- romanhn 7y ago
  I see the profit angle brought out often in these discussions, and as someone that has worked at one of these unicorns with a recent IPO, I'd like to point out that profitability is not a black-and-white consideration. A company has many financial dials and switches, and ours specifically could have easily been profitable if they had chosen to do so. It was a very intentional decision to funnel money towards further growth, which frankly I had/have no issues with. I suspect that is the case with many B2B unicorns; not sure the B2C ones could make a similar transition as easily if circumstances called for it. Not sure the dotcom crash is comparable - those were the days of companies getting millions without so much as a business plan, and going public months after being born. Sure, the companies without solid fundamentals are not going to survive in the long run, but as an industry, I don't think we're anywhere close to the crazy old days.
feniv 7y ago
I've been curious about the recent wave of IPOs as well and did some data analysis here https://thequarterly.org/S-1.html https://thequarterly.org/S-1.html Despite several notable IPOs, the overall rate of S-1 filings doesn't seem higher this year.
- iscrewyou 7y ago
  I don't think it's much about the number of IPOs but the amount debt and losses these companies hold behind those IPOs. Don't get me wrong, people who invest in these should be doing their due diligence and investing accordingly but I also think that the companies are doing their best to put up a front to cash out now so the executives can get paid.
raiyu 7y ago
"In 2013 Ms Lee found just 38 unicorns in America. Today there are 156" I wonder what could have happened in that time frame? Perhaps the ubiquity of iPhones and Android devices which have opened up old business to new competition? Hotels > Airbnb Taxis > Uber, Lyft FB > Snapchat PayPal > Stripe And with the surge in new tech companies come more companies to service the tech Pager duty, New relic, cloudera, zoom, mongo DB And also how much has the internet population and usage grown between 2013 and present. I'm not saying that the market isn't over heated, or that there won't be some companies that will face tough times in a liquidity crunch, but a bit less biased reporting would be nice. But with media these days it's all about eyeballs and impressions so balanced reporting is for the 2000s.
- govg 7y ago
  Multiple things combined to give this explosion. Off the top of my head : - 4G / 3G internet access became widespread, meaning you could suddenly have access to a lot of internet bandwidth in each phone user's hands. - Android and iOS made it easy to make applications that are almost as powerful as what a desktop application can do, which lead to many app driven ideas. - Countries like India and China rapidly embraced the internet and have huge populations on the internet now / on the way to the internet. - Machine learning really kicked off once GPUs made deep learning viable, this allows a lot of data to be processed and insights to be obtained.
sytelus 7y ago
One of the question I'd was why so many unicorns are suddenly taking plunge in to IPO in such a short window. A frequent theory I'd heard was that there is huge expectation of market downturn that can possibly last for years during which unicorns won't have enough cash to survive. This article presents reason that many VC funds were born in 2010 and their fund terms are ending now which is causing this rush.

117 points by wskinner 7y ago

The article is behind a paywall. By reloading the page and hitting escape before it fully reloads, you can still access the full text.

RickS 7y ago
https://outline.com/HwrgJ4 https://outline.com/HwrgJ4
YjSe2GMQ 7y ago
Off topic, but I recommend getting a subscription of The Economist. Totally worth the money, and the weekly format combined with an almost complete lack of bias gives a nice leisurely pace to catch up with world's events.
- alasdair_ 7y ago
  Agreed. The Economist has a bias towards free markets and free press but they are clear on those points. They do a lot of things to stay as unbiased as possible, like avoiding attaching a single name to a byline for a story. Even Karl Marx read The Economist, for what it’s worth.
  - avarun 7y ago
    > They do a lot of things to stay as unbiased as possible, like avoiding attaching a single name to a byline for a story. I don't actually understand this. I personally find that following specific authors whose journalism I find of high quality is a lot more efficient use of my time than following publications. Why does The Economist make this needlessly difficult, and what's the benefit of doing so?
    - YjSe2GMQ 7y ago
      Matter of taste I suppose. It's more like Wikipedia than other modern journalism. Some journalists use pseudonyms, for example Banyan, Butterwood: https://www.italki.com/question/377016 https://www.italki.com/question/377016 Edit: I'd say it has the effect of reducing the impact of ego on writing.
    - human20190310 7y ago
      The benefit is that it allows the content of the articles to stand on their own merits, instead of involving the reputation of the author.
      - alasdair_ 7y ago
        >The benefit is that it allows the content of the articles to stand on their own merits, instead of involving the reputation of the author. Exactly. Who emphasis should be on "is this true/ a good point?" over "is this someone I think I should agree with already?"
- rorykoehler 7y ago
  The Economist has hardcore bias. Very neoliberal.
  - YjSe2GMQ 7y ago
    Not according to those guys: https://mediabiasfactcheck.com/the-economist/ https://mediabiasfactcheck.com/the-economist/ For example, they endorsed both Democratic and Republican candidates for president in the past.
    - rorykoehler 7y ago
      I'm just going by what I have read. My ex cofounder was subscribed so I read it quite a bit. Found it to be very biased neoliberal but then again I'm interested in ideas that fall way outside the Overton window of the democrat and republican political sphere. Democrat and Republican are essentially siblings. They're not that different in that they both aim to use capitalism and the power of the nation state military to exert influence and assert dominance.
damian2000 7y ago
It loaded for me ok, I'm using the Materialistic HN app on Android
trystero 7y ago
Or simply disabling JavaScript would have the same effect.
username223 7y ago
This seems like an increasingly common modern web pattern: load the article (no one cares about that), and all of the ads and trackers (which is what really matters), then use JavaScript to throw up a popover and do whatever you can to prevent people from using readability mode or killing the popup. I'm fine with paywalls, but if you want to charge money for what you write, then just do it. Don't waste my bandwidth for something I'm not supposed to see. Put up a login page or something.

jedberg 7y ago

Another article about tech IPOs pointed out that this year the number of public companies headquartered in San Francisco will double. Apparently there are only four now, and at year's end they expect nine.

chx 7y ago
If Lyft employees put their IPO cash into real estate, they could buy every for-sale home in San Francisco. From https://www.redfin.com/blog/lyft-ipo-san-francisco-real-estate/ https://www.redfin.com/blog/lyft-ipo-san-francisco-real-esta...
- wavefunction 7y ago
  Buying every home is one thing but maintaining them too?
- djcapelis 7y ago
  The people who IPO try that each time—that's why the prices are what they are.
harryh 7y ago
Existing Public Companies with SF HQs: - DocuSign - Dropbox - Eventbrite - Fitbit - LendingClub - LiveRamp - New Relic - Okta - Salesforce - Splunk - Square - Twilio - Twitter - Yelp - Zendesk - Zynga - Wells Fargo - Charles Schwab - First Republic - Pacific Gas & Electric - Gap - Williams-Sonoma - Dolby - McKesson (thx khuey; though apparently moving to Dallas soon) - Castlight Health IPOed This Year: - Stitch Fix - PagerDuty - Lyft - Pinterest - Levi Strauss (thx mykowebhn) Expected to IPO This Year: - Slack - Uber - AirBnB - DoorDash (maybe?) - Postmates (maybe?) - Instacart (maybe?) - Asana (maybe?) I'm sure I'm missing some.... EDIT: adding new ones as I/others think of them
- khuey 7y ago
  McKesson

monocasa 7y ago

So what, does capital think there's a recession coming? Cashing out to become more liquid and becoming ready to gobble up foreclosures is what I'd be doing if that were the case.

pas 7y ago
Yet at the same time a lot of people invest in these very late stage startups. Why? Are they the fools of the stock market? Who usually buys at IPO time (besides the speculators that want to ride the early fluctuations)? There's an underwriter that does the whole IPO, sure, they are probably in the same bucket as those speculators, but to whom they unload all these new stocks? Individuals? A lot of big institutions that have some risk appetite? (But those are probably already limited partners in VCs, no?)
- linuxftw 7y ago
  Fund managers buy this crap to cash out the VC friends. See SNAP for an example: [1]. Few actual people are stupid enough to fall for this shell game, but the limited 401k options most companies offer all but guarantee some of your savings is going into these deadbeat companies. 1: https://finance.yahoo.com/quote/SNAP/holders/ https://finance.yahoo.com/quote/SNAP/holders/

quickben 7y ago

I read this analysis that before the Dotcom bubble burst, unicorns cashed out in a similar fashion. The authors were proposing to watch for the next wave as an indicator, as VCs would be trying to cash at the best time (or at all) before a recession.

hkmurakami 7y ago
This hopefully shouldn't be a surprise for those looking to invest in the public stock market, given the ample amount of caution many participants have been expressing over the last 12+ months regarding our current status of being in the late stages of economic expansion.
- pascalxus 7y ago
  This will be known as the everything bubble, everyone saw coming. I don't think anyone's going to be surprised when this melt down arrives. Though the length of recovery needed to bounce back will surprise people who haven't been watching the public/private US/Global deficits over the last 20 years.
  - aaronblohowiak 7y ago
    How are your assets currently allocated? I have 71% cash, bonds, and CDs. 20% equities, and the rest in private placements.
  - dehrmann 7y ago
    > This will be known as the everything bubble Not really; there isn't the irrational exuberance that the dot com, housing, or bitcoin bubbles had. There aren't stories about people getting rich quick, new normals, etc. > ...deficits over the last 20 years. You're onto something here. There's definitely been an increase in government spending. The other thing going on is that there was a lot of quantitative easing following 2000 and 2008. There's another word for everything going up: inflation. Maybe that's what we're seeing, but government inflation metrics are missing it for some reason.

olivermarks 7y ago

As Reid Hoffman of Greylock Partners, a venture-capital firm, and the co-author of a book about blitzscaling, puts it: “In a connected world, someone will build an Amazon. The only question is who and how.” '...what they also lack, in 11 cases out of 12, are profits. Today, according to Jay Ritter of the University of Florida, 84% of companies pursuing ipos have no profits. That is remarkably high. Ten years ago, the proportion was just 33%. To see profitlessness as rampant as today’s you have to go back to the peak of the dotcom boom in 2000.' I'm in the Bay Area and this late stage of the tech business cycle reminds me a lot of the build up to the dot com bust. for Enron see Theranos (and possibly even Tesla), along with lots of mega deals over basically profitless platform companies posturing around dominance of future markets...

jypepin 7y ago
I don't disagree, but it's been 10 years that we keep hearing that "<insert something> are now showing that the dot com burst is coming again"
- z3t4 7y ago
  Bubble bursts are entirely speculative. When people think the bubble have burst or are about to burst, that's when it will burst.
romanhn 7y ago
I see the profit angle brought out often in these discussions, and as someone that has worked at one of these unicorns with a recent IPO, I'd like to point out that profitability is not a black-and-white consideration. A company has many financial dials and switches, and ours specifically could have easily been profitable if they had chosen to do so. It was a very intentional decision to funnel money towards further growth, which frankly I had/have no issues with. I suspect that is the case with many B2B unicorns; not sure the B2C ones could make a similar transition as easily if circumstances called for it. Not sure the dotcom crash is comparable - those were the days of companies getting millions without so much as a business plan, and going public months after being born. Sure, the companies without solid fundamentals are not going to survive in the long run, but as an industry, I don't think we're anywhere close to the crazy old days.

feniv 7y ago

I've been curious about the recent wave of IPOs as well and did some data analysis here https://thequarterly.org/S-1.html https://thequarterly.org/S-1.html Despite several notable IPOs, the overall rate of S-1 filings doesn't seem higher this year.

iscrewyou 7y ago
I don't think it's much about the number of IPOs but the amount debt and losses these companies hold behind those IPOs. Don't get me wrong, people who invest in these should be doing their due diligence and investing accordingly but I also think that the companies are doing their best to put up a front to cash out now so the executives can get paid.

raiyu 7y ago

"In 2013 Ms Lee found just 38 unicorns in America. Today there are 156" I wonder what could have happened in that time frame? Perhaps the ubiquity of iPhones and Android devices which have opened up old business to new competition? Hotels > Airbnb Taxis > Uber, Lyft FB > Snapchat PayPal > Stripe And with the surge in new tech companies come more companies to service the tech Pager duty, New relic, cloudera, zoom, mongo DB And also how much has the internet population and usage grown between 2013 and present. I'm not saying that the market isn't over heated, or that there won't be some companies that will face tough times in a liquidity crunch, but a bit less biased reporting would be nice. But with media these days it's all about eyeballs and impressions so balanced reporting is for the 2000s.

govg 7y ago
Multiple things combined to give this explosion. Off the top of my head : - 4G / 3G internet access became widespread, meaning you could suddenly have access to a lot of internet bandwidth in each phone user's hands. - Android and iOS made it easy to make applications that are almost as powerful as what a desktop application can do, which lead to many app driven ideas. - Countries like India and China rapidly embraced the internet and have huge populations on the internet now / on the way to the internet. - Machine learning really kicked off once GPUs made deep learning viable, this allows a lot of data to be processed and insights to be obtained.

sytelus 7y ago

One of the question I'd was why so many unicorns are suddenly taking plunge in to IPO in such a short window. A frequent theory I'd heard was that there is huge expectation of market downturn that can possibly last for years during which unicorns won't have enough cash to survive. This article presents reason that many VC funds were born in 2010 and their fund terms are ending now which is causing this rush.