Do you remember 2000, when all of these crazy Internet companies were going on about the "eyeballs" they had? None of them really had a viable business model, and most of them are gone now. You remember, right? Pets.com, eToys, Infospace, Webvan, etc. There was a secondary boom in the mid to late oughts, where companies dropped vowels from their names, and VC's threw millions at startups with the latest app in hopes of finding a unicorn.
Sometimes this works out, and sometimes the company will even go public, though that's a rarity these days. But we had a unicorn today... Snapchat went public, and it's now worth $30 billion. Even if you don't use it, you probably know what it is, the ephemeral chat app that teens use to send each other nudies. I guess some people over 30 use it, but it definitely skews young. I don't know why the world needs so many chat apps, even one that forgets, but deciding it's worth $30 billion is insane. Keep in mind, they lost a half-billions last year, and by their own IPO filing, declared that they might never be profitable. If there's a viable business model relative to the insane amount of money they're spending, no one knows what it is.
Let that soak in for a minute. Thirty. Billion.
A lot of people got rich today, which is no small achievement. It just doesn't feel like it's based on anything.
After working in technology for this entire time, it seems like the obsession over unicorns hasn't subsided. The number of technology companies that have managed to stick around and become household names is not large. And yet, this whole system of venture capital feeding projects, I wouldn't even call them businesses, seems inefficient and wasteful.
What can I say, I'm biased because I've always beat the Basecamp (formerly 37signals) drum, a company that built something sustainable with its own money, going strong for 17 years. Now I work for a small company that is also bootstrapped, has a viable business plan and is creating something valuable and inspiring for its customers. That's pretty exciting to me. I think that's the engine that really feeds the economy in the broader sense... small companies that solve problems and grow at a rational and sustainable rate. Maybe they even level off at some point, but if they don't go public, that's OK.