Everyone is always excited to start up anything. It’s beautiful to see something you created grow before your eyes. Albeit, do you have all it takes to manage and finish what you started? Much more a Unicorn Startup.
What is a Unicorn Startup?
In finance, the term “Unicorn” describes a privately owned startup that has been valued at over 1 billion dollars. The term was first used in 2013 by Aileen Lee, a venture capital investor who used it to describe the 1% of tech startups that had a valuation of over 1 billion dollars.
The advent of unicorns in global business is one that rattles several schools of thought. While some experts are of the opinion that unicorns are the product of technological advances and innovation, others believe that the surge in the presence of unicorns is symbolic of a bubble in the industry.
The process of valuing unicorns is one that involves an advanced consideration of various factors as well as how long-term forecasts turn out. Some of the top ten unicorns today include Stripe, Bytedance, Uber, UiPath, Nubank, SpaceX, Databricks, DiDi, Instacart.
Have we had companies rise to the level of a Unicorn and crashed? Yes. Some of which are Theranos, WeWork, and Quibi.
The Rise of Theranos
Theranos was a privately held health technology company in America. It was founded in 2003 by 19-year-old Elizabeth Holmes inspired by her phobia for injection needles. It started out with a bang by amassing the status of a breakthrough technology company. This came on the heels of claims that the company could run blood tests using only little via a rapid automated process the company had developed. These claims will go on to be a hoax.
Theranos raised more than US 700 million dollars from venture capitalist and private investors resulting in a $10 billion peak valuation in 2013 and 2014. Word soon got out about Theranos, and Holmes and their fame began spreading with media attention from the likes of Fortune magazine in June 2014. Holmes made claims about how her company’s blood test line offered more than 200 tests and was ranging up to more than 1000, which she later claimed was false.
How did Theranos Crash?
What followed the discovery of these false claims was a heap of lawsuits. Investors and patients alike in Arizona sued without a single care. These cases all ultimately got settled. By the end of 2017, Theranos was in need of cash and made a deal with Fortress Investment Group for 100 million dollars. Then in March 2018, Holmes and the company were sued with massive fraud though Theranos and Holmes settled.
Theranos soon retrenched the majority of its remaining employees and made another attempt at getting more funding from investors. However, the heat began to get unbearable for Holmes, who finally stepped down as CEO of Theranos in June 2018. By the end of summer, it appeared to be the end for the company itself.
How did WeWork Rise?
WeWork is an American commercial real estate company with a business model that allows technology startups to share flexible workspaces. These shared workspaces were both physical and virtual — made possible via custom web and mobile app development. As of 2019, WeWork’s IPO had grown to become one of the most highly anticipated public offerings.
In fact, Bloomberg columnist Matt Levine noted that at its peak valuation, WeWork almost equated half the total valuation of publicly traded US real estate investment trusts. This meteoric ascent stirred up debates over the years as to whether WeWork was a tech company or a real estate startup.
What Went Wrong for WeWork?
Things began to go south for WeWork just after it announced an initial public offering of shares on August 14, 2019. Six weeks later, ITS CEO Adam Neumann voted to quit the role and give up his huge chunk in WeWork’s stock. Neumann’s resignation came out of pressure from some of the company’s board members as well as investors concerned about the company’s business model, leadership structure, and toxic corporate culture.
A former WeWork employee alleged in a civil case in 2018 that she was groped or sexually harassed at corporate events. When SoftBank, the largest investor in WeWork took over the struggling company in 2019, WeWork was valued at $8 billion — a mighty decline from its peak valuation of nearly $50 billion earlier in the year.
The Rise and Fall of Quibi
Quibi launched in April 2020 as a streaming service offering shows in 5- to 10-minute “chapters” produced for smartphone consumption. Quibi was tailored for entertainment consumers who preferred short bits of content on their smartphones. However, the advent of the coronavirus pandemic made would-be subscribers disinterested in Quibi’s on-the-go content model.
It shut down in December 2020, barely six months after launching, after failing to hit its subscriber projections. In January 2021, Quibi’s was sold for less than 100 million dollars. It eventually allowed subscribers to watch its shows on their television.
In summary of the lessons gleaned from these startups, we can conclude that factors such as inadequate planning, insincerity, poor work ethics, mismanaged funds can lead to the downfall of a high-flying business.