5 ms·
Zombie unicorns are haunting Silicon Valley
https://archive.is/9mfzD https://archive.is/9mfzD
- fnord77 4mo agoSo, series h, i, j companies are worthless?
- Our_Benefactors 4mo agoCan you give some examples of companies that are series J that you see as having a realistic chance of IPO?
- preinheimer 4mo agoStripe is at I. I think they’ll ipo.
- andsoitis 4mo agoFalling valuations spell horror for vcs. More recently launched funds have been returning markedly less money to investors than those of earlier vintages, according to the World Economic Forum. They have also underperformed the s&p 500 by a wide mark, particularly those that did not invest in a small club of artificial-intelligence superstars
- tartoran 4mo agohttps://archive.is/9mfzD https://archive.is/9mfzD
- scrame 4mo agonow this wants me to scan a QR code with a mobile device?
- decimalenough 4mo agoMy first attempt to open the archive link took me to a Brazilian radio station that wanted me to install Adobe Flash. Second try worked fine.
- jeffreygoesto 4mo agoEventual consistency is enough for everybody.
- notpushkin 4mo agoGoogle reCAPTCHA is a joke. I’ve got one “scan to unlock” recently too but there was an option to switch to audio captcha at the bottom. I hope it stays this way.
- skinfaxi 4mo agoThank goodness for the ADA.
- notpushkin 4mo agoI’m a bit worried they might try to pull it off in other markets though.
- GJim 4mo agoBeing redirected to an unknown website by QR code (no visible URL)? Where is the worst you could end up!
- latentframe 4mo agoZero interest rates kept many weak companies alive but they also have give great companies time to find product market fit, and the hard part is to separate the two in hind sight
- hn_throwaway_99 4mo agoI'd be interested in any examples where a "zombie" company in the US was sloshing around for a few years and then finally found product market fit. I think it's probably incredibly rare, and I don't think it's really that hard to identify weak companies that have been treading water for years as you appear to think.
- tqi 4mo agoMy impression is a lot of these companies raised mega rounds right before interest rates went up, and are now able to tread water by cutting headcount enough that their revenue + interest can sustain them. To what end? Who knows...
- dilyevsky 4mo agoI know a few who are really feeling the pressure from customers now being able to vibe code part or their product and also their cloud bill is about to explode because hardware prices are through the roof
- contingencies 4mo agoSaaS was always destined for this, with or without AI. Excluding the small subset with network effects, the nominal nature of a remote execution aid in basic business process was always semi-farcical.
- red-iron-pine 4mo agoyeah got a buddy at a startup unicorn, moved from Canada to work down in the Valley, and he said basically the same: no moat, and AI could hack together 80% of their product... since it already is... strong argument to me made for the support, dev, and long-term angle, but if any of the FAANGs or big players decided to eat their lunch they probably could. He reckoned they could get something comprehensive and mature enough, with a real customer base, to offset the build effort and thus get acquired.
- dilyevsky 4mo agoEveryone says support but great support requires culture of excellence and customer obsession and that were the first things to go when those zirp-era scaleups went on hiring sprees
- JV00 4mo agoTo soon be scooped up by bending spoons
- rwmj 4mo agoCameo (an example in the article) is an interesting one. It seems like a stable, steady business, making money, should be easy to accurately value if you have access to the financials. No surprise that the "It's $1bn!!!" valuation came from Softbank Vision Fund. https://en.wikipedia.org/wiki/Cameo_(website) https://en.wikipedia.org/wiki/Cameo_(website)
- TZubiri 4mo agoIt also peaked during the COVID lockdowns, lots of actors needed alternative sources of funds. Maybe the numbers for 1BN came from multiplying revenue into the future, or hell, expecting it to grow even.
- ares623 4mo agoNo need for "maybe". We know by now how these people think
- rwmj 4mo agoAbsolutely right, but you can also see how this can be a sustainable if not spectacular business going forward even in normal times. There are plenty of "resting" actors and grifting politicians who don't mind doing 60 seconds of work for the price of a round of drinks. It's not a failure even if VCs think it is.
- zmgsabst 4mo agoI feel like there is a business in taking successful startups-gone-lifestyle, buying the name and IP from the “rocket ship” and letting them have more funds for a pivot.
- v5v3 4mo agoI'm assuming there is a lot of local competition to Cameo in other countries? As it has a large potential market if it did dominate globally.
- 4mo ago
- EagnaIonat 4mo agoWhy post a link that people have to pay to read? Same article: https://www.businesstimes.com.sg/opinion-features/zombie-unicorns-are-haunting-silicon-valley https://www.businesstimes.com.sg/opinion-features/zombie-uni...
- self_awareness 4mo agoFollow-up question: why upvote an article that you probably can't read?
- EagnaIonat 4mo agoI didn't upvote it.
- bruce511 4mo agoCompanies being devalued is not news. It happens on the stock market everyday. For companies that rely on outside investment to survive however it can become a slide to oblivion. If the company itself is profitable, then typically it can continue. There's no interest rate on VC investment, and if profitable it can run forever. Customers, employees, users and so on are all fine. Investors? Well, they're potentially getting some returns through dividends, but its minor and not what they were chasing. Of course the VC investment model is high risk. That's kinda the point. It's a bet on IPO or (valuable) acquisition. Most companies end up as neither. Will this affect new VC funds in the future? Maybe in the short term. But there are still enough IPOs (like SpaceX now) and still enough greedy people willing to play the lottery. Sure the absolute amount of VC money may come down, but I don't think the model is going away. Indeed it may start to lead to saner valuations along the way.
- promptsaredead 4mo agoAgreed. It's gonna be space, then robotics, then quantum robotics, then quantum solar nuclear robotics. I think it depends way more on where and how much the wealth is concentrated than anything else
- nradov 4mo agoEven if a company is profitable, depending on voting interest and board control the investors may be able to force a sale.
- bruce511 4mo agoTrue. Assuming there are buyers. And I'm not sure why buyers would pay more than value. In other words, the sale wouldn't really achieve anything other than lock in the capital write-off. The return would be trivially small.
- lelanthran 4mo agoThe controlling voters don't really need to force a sale; they could force a wind-up of the business. "Sure, we invested $100m, but you are still only breaking even. May as well close up shop, sell the data for as much as we can get and split the proceeds amongst us investors" is just as possible.
- walrus01 4mo agoZunicorn Zune-icorn? Zombicorn! I know of some actual in use Microsoft Zune that have outlasted many companies that were predicted to become unicorns.
- ares623 4mo agoYou can do anything with Zombicorn. The sky is the limit, with Zombicorn. Welcome, to Zombicorn.
- selimthegrim 4mo agoExcept keep Flash alive apparently.
- dasil003 4mo agoJust realized zombo.com recently got a major update
- wave_function 4mo agoYeah I can’t decide whether the new song is ai slop or a banger
- selimthegrim 4mo agohtml5 version still has the original
- agrippanux 4mo agoThe liquidation event is unattainable at Zombicorn!
- jcgrillo 4mo agochildren of the zombie corn
- epsteingpt 4mo agoIf you think it's haunting Silicon Valley, wait til you see what's on the balance sheets of Private Equity, which holds these and many, many more overvalued companies!
- Urahandystar 4mo agoYeah, that really is a horror show. The hidden problem with the zombie firms is that as the liquidity dries up larger VC's firm will end up becoming private equity firms.
- deleted 4mo ago[deleted]
- ____tom____ 4mo agoWe need to stop pretending the VC valuations are meaningful. It's like asking someone playing roulette to value "13 black", after they bet on it. There valuations are always based on expectations of huge growth, not current value. Growth predictions with an extremely low confidence level. VCs make up for it by making a lot of bets. The companies NEVER have current profits (The actual measure of value) that would justify their valuation. So, it's comparing gambling payouts to corporate valuations, aka "apples to oranges", which are not related. When the predicted growth doesn't occur, the companies valuation becomes based on its actual value (profits).
- EDM115 4mo ago> 17 black Let it ride !
- waterhouse 4mo ago> It's like asking someone playing roulette to value "13 black", after they bet on it. Even worse, because you don't get better odds or payouts by persuading others to bet on 13 black, but you do when they invest in the company you've backed.
- ____tom____ 4mo agoNo, but you can form a syndicate, convince others to buy in, get your money out and still participate in the payout, if any.
- jillesvangurp 4mo agoIt's indeed not that black and white. Growth and revenue can happen quite early and they are usually seen as signs that a company might eventually become profitable. The whole point of VC funding is to put all available resources in growth, not in profit. Investments in profitable companies aren't really venture capital investments. Different class of investors that do that, generally. Where the whole thing starts looking like gambling is when companies get huge rounds based on essentially no proof whatsoever that the thing will ever grow or have revenue. And when the idea is basically "we'll pay famous people to send greetings to people" we're in obviously stupid money territory. That was never going to have the revenues to back up the inflated valuation. And somebody still sank a few tens of millions in that to find that out the hard way. That company had a paper valuation of a billion. But it doesn't necessarily mean all those tens of millions were spent and lost. Investors might commit the money but it's usually conditional on growth targets and milestones. When shit goes south, they'll pull the brakes and the money stops flowing. Good investors wouldn't wait until all the money is gone to do that. The reason these investments happen is that VCs mostly aren't investing their own cash. They are being paid to make investments and to inflate their portfolios. By the time the shit hits the fan, they'll have gotten their payoff. It all looks great until it doesn't. And inflated valuations make them look shit hot even when they are clearly not. This attracts more capital for them to invest. Of course at some point the shit does hit the fan and the money evaporates. That's when you get acqui-hires and other constructions that are usually portrayed as a successful exit that, again, makes the VCs look like they know what they are doing. This is all about damage control that is about both financials and reputations. Never mind that it's effectively a fire sale at that point. But investors get to swap their bad shares for good shares, and founders get to work in somebody else's company for stock options. And the "buying" company gets some nice people and they stay best buddies with the investors they just bailed out who might typically also be investors in those companies. In the end the madness gets written off against the overall fund performance. It only takes a few good gambles to work out for everybody to come out smelling like roses.
- griffinJH23 4mo agoIt's simple really. If the VC's don't move the money, then it's dead money to them. These are calculated risks that they absorb under the premise of regret minimization. They don't really have a choice but to take occasional losses. It's nearly intentional.
- ginkgotree 4mo ago2015 era VC isn't aging well
- seydor 4mo agoThey should be measuring valuation inflation and the Fed should intervene to prevent the debasement of VC
- fn-mote 4mo agoYou need a better explanation of why you think the market isn’t functioning here. Seems like a classic case of “putting your money where your mouth is” - if you think the valuation is wrong, don’t invest. (Of course that only applies to those able to invest, but the same principle applies.)
- superfrank 4mo agoI was an early employee (#20-something) at a company that peaked at just over a billion dollar valuation during Covid and that now sits at somewhere between 1/2 and 1/3 of that depending on who you talk to. I'm still really close with a lot of early employees and while I was lucky enough to have a liquidity event happen shortly after I left that allowed me to cash out for a decent, but not life changing, return, many of my friends were not. One of the things I think a lot of people may not realize is how badly this zombiecorn state fucks employees with stock options. A lot of startups will give you a limited amount of time after you leave to exercise your stock options (90 or 180 days is common based on my experience). If you don't exercise your stock options and buy your stock within that time period the options expire and you get nothing. The problem is that if you buy the stock, you won't be able to sell until there's a liquidity event (usually a new funding round or IPO) and current investors don't want to take investment at a lower price unless they absolutely have to. I know some other early employees who were laid off who had to make the choice between dropping $75k or $100k to buy stock that is worth 10x that on paper (even at the current valuation) and praying for a liquidity event that will probably never arrive or letting go of shares that just a few years before seemed like they would be a life changing amount of money. I know people who've done both and neither route leaves people feeling good about their decision. I know common wisdom is that you should treat that stock like it's worth nothing until they day you sell, but when you've worked at somewhere for 5-10 years and seen the on-paper value of your stock rise to a life changing amount of money, I think it's hard not to assume that you'll be able to cash that out one day.
- aurareturn 4mo agoWorse is if you paid taxes on that $100k valuation but it is only worth $25k now.
- superfrank 4mo agoOne of the people I know had that happen and didn't realize it. Between the exercise cost and taxes I think it ended up costing them nearly a quarter million. I know that seems insane, but even at a $500m valuation their potential payout is enough to retire on.
- skrebbel 4mo agoQuick warning that finance bros call any healthy company that isn't on an extreme growth path "zombies". In VC eyes they're "undead" because that big fat exit is not likely to come, but actually in reality many of these are perfectly healthy companies doing fine. The journalist who wrote this clearly walks in the same circles cause they're happy to call healthy companies that are alive and kicking, serving their customers, creating jobs and so on, "zombies". That's not to say that surely there's also plenty of once-unicorns which really are borderline bankrupt, and that lots of these companies were extremely overvalued and VCs made bad deals in the ZIRP. But the term "zombie" is a derogatory anti-entrepreneur term invented by VCs who try to encourage founders to "go big or go bust", quietly disregarding the huge incentive mismatch they got. Because unlike the VCs, the founder has all their eggs in one basket.
- titanomachy 4mo agoI think you're right in a sense. But some of these "healthy companies serving customers and creating jobs" have taken a 50% haircut on their valuation, which puts them in a difficult position regardless of how reasonably they are doing operationally.
- v5v3 4mo ago>By May 2026, 332 of the 1,900 unicorns in a database maintained by Ilya Strebulaev of Stanford University had raised money at a valuation at or below their peak (see chart). Of those, 212 were valued at under $1bn. As many as 383 had disclosed no new funding in the previous three years; 41 of these had lost unicorn status 332 out of 1900 isn't that bad? Even the further 338 if confirmed would still be less a minority of the overall 1900
- Maakuth 4mo agoDown-rounds are very undesirable though. So those 332 likely have not had other options. True number of companies that wouldn't really be valued as high as their peak raise is probably higher, but some of them have been able to find enough revenue or other sources of funding in order not to raise and be valued down.
- sidewndr46 4mo agoif you're a current equity holder they're undesirable. If you're buying in or buying more, no real reason to avoid a down round so long as the company is viable
- androiddrew 4mo agolol I work for one of these still. It was an auto ML product, so the company is desperately trying to pivot to Genai and agents. Trying to catch the wave. I don’t know how well it’s working though. Churn keeps happening in the core business, processes meant for a large corporation are slowing progress in developing the new platform, and leadership has churned till only west coast AI pilled Amazon alums are left.
- cmiles8 4mo agoThis will only get worse as the AI bubble pops or cools and generates a ton more AI zombicorns too. It really sucks for employees as their equity stake gives reason to stick around if there’s a good exit, but as every day passes odds increase that either the company goes bust or gets sold in some aqui-hire or salvage sale that gets investors something back but tends to leave employee shareholders with nothing. There are post IPO tech zombies as well. Companies that IPOed and aren’t at serious risk of bankruptcy as they have cash, but aren’t profitable and nothing they seem to do changes the trajectory of the company. They could coast for years to come just slowly burning cash but have no clear prospects either to be anything more than a has-been just coasting along the train of irrelevance.
- flancian 4mo agohttps://archive.is/UCJUJ https://archive.is/UCJUJ
- 32-ai-toasters 4mo agothanks
- hn_throwaway_99 4mo agoThis article focuses on "VCs wringing their hands" about zombie unicorns, but I'm kinda baffled at what the employees are thinking. For an employee, it would seem like the only (financial) reason to stay at one of these companies is if you didn't have any other options - which I imagine is reasonably common these days with the tech job market being in the shitter. But stock options at these places are nearly guaranteed to be worthless, with any sales proceeds going to investors with preferred shares. I think a lot of employees may stick around for social/personal reasons ("I helped build this company and I want to see it have a successful exit"), but speaking from experience, it's better to cut ties and move on. Time is your most precious resource, and using your time on a slowly dying company is usually a poor use of that resource.
- octokatt 4mo agoFor the sake of mythological accuracy, I hope that Unicorns sunk by debt and managing to pull into negative ARR (due to overhead costs) will get called Nightmares. But Zombie Unicorns being an accurate term is enough to make me happy today.
- dzonga 4mo agoBezos has something to say about this - which unfortunately has skipped over the whole industry. you only raise money to grow "cash flows". if you can turn $1 into $3 do it. otherwise don't. unfortunately SV tends to do the opposite - turn $3 into $1.