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Dead Silicon Valley Unicorns Pile Up as 'Unicorpses' (bloomberg.com) 37

Posted by msmash from the closer-look dept.
An anonymous reader shares a report: Now more than a year into the tech "correction," the denial phase is over. There appears to be a broad consensus that lower valuations are here to stay, at least for the foreseeable future. But for well-capitalized private companies, it can take a while for the dominos to fall. We've started to see once highly valued businesses sell for disappointing outcomes or shut down altogether. There's a term for these erstwhile unicorns that have seen their valuations crash: unicorpses.

We're starting to see businesses that were valued at hundreds of millions or even billions of dollars on paper, evaporate. While last year saw ill-fated failures for fintech business Fast and crypto money mis-manager FTX, the pace of unicorn deaths seems to be accelerating. Just last week we saw the fire sale of truck software business Embark, which went public in 2021 via a SPAC, valued at $4.25 billion. It sold to a private buyer for just over $70 million. Then there was the case of Plastiq, a highly valued lending and payments business that was supposed to go public via a SPAC last year, but failed to list. The company has now filed for bankruptcy. Not to mention, Elizabeth Holmes finally went to jail this week for her famously fraudulent business, Theranos.
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Dead Silicon Valley Unicorns Pile Up as 'Unicorpses' More

Dead Silicon Valley Unicorns Pile Up as 'Unicorpses'

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  • "Unicorpses" (Score:5, Funny)

    by JustAnotherOldGuy ( 4145623 ) on Friday June 02, 2023 @05:29PM (#63571731) Journal

    'Unicorpses'

    Damn, I think I just the new name for my Punk-Symphonic-Techno-Klezmer band: The Unicorpses

    The old band name was "Free Drinks Till Midnight" but we had problems with non-paying patrons.

  • Unicorpses.
  • The first rounds of valuation were overly optimistic. And all VCs participated in the optimism out of self-interest.

    • Re: (Score:1)

      by Anonymous Coward

      The first rounds of valuation were overly optimistic.

      The first rounds of valuation were blatant lies. Everyone knew they were lies. But they did it any way because sometimes you get lucky and the lie pays off. And nobody ever goes to jail, so you might as well play the game.

  • Basic MMO economy (Score:5, Interesting)

    by Darinbob ( 1142669 ) on Friday June 02, 2023 @05:42PM (#63571757)

    What people often forget is that you shouldn't value a company based upon a peak valuation of a stock and multiple by the number of outstanding stocks. Once the stocks start selling the price often goes down. Someone wanting 100 shares at $100 each is not the same as ten thousand people all wanting to buy at that price.

    Valuations have often been broken, and I'm not sure why financial markets don't come up with alternate methods of valuation. Sometimes someone buys and pays too much based on hype, then the valuation goes up, others take notice and want to buy, now you rinse and repeat - until an analyst casually remarks "this is probably not a good price" and the stock plummets...

    • Valuations for companies that are not publicly traded are hype not reality that is why they are called Unicorns, because they are myths.
      • Your statement would be accurate if you added "not publicly traded...and also not profitable." Private companies that are profitable are valued based on an EBITDA multiple typically, sometimes a revenue multiple.
        • Your statement is better than the OP but still not correct. A private company that is not profitable can STILL have a valuation. You are forgetting that it can have assets like IP, personnel, real estate, equipment etc. An example is a licensed insurance shell company with an operating loss, that can sell for millions due to the value of the existing licenses + in place admin. The present value of the future value of the company based on relation to it's peers can sometimes also factor in, especially if the
          • Oh you're definitely right about this, but that's not the case with unicorn tech startups (I should have qualified it as private tech/SaaS companies). Usually they're buying recurring revenue (ARR) and goodwill. Nobody's buying to get your awesome team, they can just straight poach those people with less money. Sometimes there's IP etc but that's usually liquidation rather than a normal acquisition.
            • I agree with your comments when scoped to private tech/saas. The tech recurring revenue model has a lot of volatility compared to other recurring revenue models in other industries.
    • On the other hand when somebody takes a company private they usually actually have to pay a premium over that valuation.

    • Re: (Score:2)

      by rgmoore ( 133276 )

      Valuations have often been broken, and I'm not sure why financial markets don't come up with alternate methods of valuation.

      The valuations are broken because they're part of a scam. The whole idea is to overvalue the company so it can be sold for way more than it's worth at IPO, at which point the people who funded it can cash out for a big profit. Enough of the people who run the markets are in on the same kind of scam that they don't want to rock the boat. The market, or at least the market for startup

    • It's not a bug, it's a feature. Big flashy numbers is how you get to depart the fools from their money. The numbers going up and down as dramatically as possible is paramount to this.

      Or to put it in more fancy words, the stock market is based on the interplay of information asymmetry and stock volatility. So if you want to make buck, you need to manufacture and maintain this dynamic.

      But the meaninglessness actually runs much deeper than just the market cap. Consider tihs. Imagine there is a stock that does

      • Which kinda brings us back to the beginning. It's about the fool and his money.

        Everything you said is more or less equally true of money itself. A dollar is essentially a "share" in the future economic output of the nation whose government issues it. Of course nobody can say for sure what that economic output will be or how many other shares (dollars) will be competing for redemption at the time you need to redeem your dollar for goods and services. You might earn a dollar today digging a ditch and spe

        • Everything you said is more or less equally true of money itself.

          Money has the additional characteristic that it's the medium of exchange that's required if you want your economy to be even remotely efficient. Money isn't meant to be something that increases in value.

      • Reminds me of a quote of an old guy. "I worked for 12 different companies but never left my desk, or had to change my job". He was an expert. His company was sold multiple times to different companies. He said it was a good thing. It made managers feel important.
    • becuase it's always been based on not being th eone left holding the bill when the music stops (along with inside information when the music is going to stop). plus if you are big enough a 'do over' if you get it too badly wrong

    • This is where fundamentals analysis comes in. Companies are required to post financials. One can look at profits, losses, free cash flow, expenses, debts, etc, price to earnings, price to book, and so on, to get an idea of how overvalued a stock is compared to the measures of a companies revenue, assets, etc. 10-15 is a modest P/E ratio indicating a stock that is valued near to what the company is worth, 30 is getting more overvalued. I have seen Nvidia trading at 200 which is horrific.

      Stocks get overvalued

    • By the way there are services that have overvalued/undervalued or overbought/oversold indicators on stocks that give that services view on if a stock is overvalued based on their fundamentals analysis. yahoo finance for example. Some brokerages also have it built in on their stock information accessible in brokerage accounts

    • A word on prices, a stock with a moderate price with a PE ratio of 10 does not necessarily mean its a great company. A low PE can indicate the market thinks there is low growth potential, or could indicate some other problem with the company in some cases. When the entire stock market is overvalued, unfortunely the good companies like walmart and costco end up getting overvalued and with how things work today a good company with a low stock price tend to be quickly found meaning its hard these days to find

    • Re: (Score:2)

      by AmiMoJo ( 196126 )

      There is a middle ground between what the US has, where money to flung indiscriminately at tech start-ups, and what the UK has here it's difficult to get funding for anything so tech moves away or sells itself to foreign investors.

  • I remember hypes like the "new market" fueled by the Internet becoming popular, the Gig economy or the Crypto hype, but those all seemed several years apart. Now new investment hypes are born like every year, so there are much more corpses to be expected. Just wait until all those quantum computing, fusion powered, super-sonic flying startups implode...

  • Not just the up and coming (Score:3, Interesting)

    by quonset ( 4839537 ) on Friday June 02, 2023 @06:11PM (#63571817)

    Twitter is now worth only one third of what Musk bought it for [usatoday.com] as advertisers flee the barrage of bots and hate speech [benjerry.com].

    • Re:Not just the up and coming (Score:5, Interesting)

      by Opportunist ( 166417 ) on Friday June 02, 2023 @06:25PM (#63571841)

      The problem is, this fate is waiting for every single "social" site that depends on its customers to create its content (which is pretty much all of them). The circle is always the same for all of these pages, from YouTube to Reddit to Facebook. Let's look at it from the history of YouTube.

      YouTube opened and people started to make content. Very poorly edited content, mind you, and a far cry from the polished and perfect content TV offered. But people were fed up with TV and its prim-and-proper pabulum, they were fed up with it, they wanted something fresh and exciting, maybe even new. And content creators offered this. They created channels where people screamed and were anything but PC, they swore, they were crass, they were actually even obnoxious. And people liked it. Sure, it was not polished, but at least it felt honest.

      In came advertisers who didn't want to put ads on screaming morons that threatened their prim and proper image. They wanted to advertise with nice and wholesome content, and YouTube reacted and withdrew its support (and mostly its ad support) from those content creators that weren't family friendly. Which in turn pretty much meant that YouTube pretty much turned into cable TV. Bland, boring drivel. And people went away. Now they're probably with Tiktok.

      And that will continue. People will create stuff, people will come, advertisers will shake their head and the whole shit comes crashing down, and the music moves on to the next town.

      Dear advertisers: You'll either have to advertise with what people want and get eyeballs or you can have family friendly bullshit and get none. Choose. Because you cannot get both.

      • Re: (Score:1)

        by Anonymous Coward

        Dear advertisers: You'll either have to advertise with what people want and get eyeballs or you can have family friendly bullshit and get none. Choose. Because you cannot get both.

        Unfortunately, that is not true. Many television shows, with no nudity or swearing or anything else that is not "family friendly", bring in hundreds of millions of dollars a year.

        • Lacking competition, they do. The internet and its new media offered that competition, this was also what drew people there. Because I guess we can agree that it's more convenient to just push the ON button on the TV set than to figure out how to watch something on YouTube.

          The reason these shows are (re)gaining a viewership is that the competition that YouTube and other such media platforms were is losing its appeal. There was a time when internet shows, from YouTube clips to streaming services, became a co

      • I'm not sure, but I think you just outlined the plot of _Wayne's World_.

      • Re: (Score:2)

        by AmiMoJo ( 196126 )

        Dear advertisers: You'll either have to advertise with what people want and get eyeballs or you can have family friendly bullshit and get none. Choose. Because you cannot get both.

        YouTube offers them both. They can choose to only appear next to the most bland and inoffensive videos if they want. They don't care all that much that there are hate videos on the site, just that they aren't places anywhere near them.

        The shitty thing is that the system ends up demonetizing "controversial" videos, like trans make-up tips. Not wanting to associate with political ideologies or swearing is fine, not wanting to associate with people who have a protected characteristic isn't.

      • Which in turn pretty much meant that YouTube pretty much turned into cable TV. Bland, boring drivel. And people went away. Now they're probably with Tiktok.

        This sounds extremely incorrect.

        • Yes? Take your average YouTuber that's been around for more than 10-15 years and compare their old content to their new content. Especially someone who used to yell, use expletives or behaved otherwise "outrageous".

          Compare to their current videos and tell me there isn't a considerable difference in tone. And please don't tell me it's just because they "grow up".

    • Re: (Score:2)

      by Luthair ( 847766 )
      While I believe Musk destroyed a lot of value with his idiocy, didn't he also saddle Twitter with a bunch of debt through a leveraged buyout. So if it was worth 44 billion before the buyout, giving it 13-billion in debt presumably immediately reduces the value of the company to 31-billion? So he probably destroyed about half the value instead of 2/3 ;)

  • you gonna eat that [cardtrader.com]?

    . . what? Something wrong?

  • It works like magic on any fintechcryptoblockchain product.

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