Apparently, the plummeting values recently of WeWork, Uber and “other unicorns” is causing some “soul searching” among those who helped to promote these companies.
The WSJ has a recent article chronicling the “evaporation”of $100 billion from the losses experienced with these companies. This fact is apparently causing some of the “start-up executives” to talk up profitability over growth (we’ve mentioned this in previous posts), and venture capitalists to become more cautious about spending. In recent weeks, among those companies who have recently experienced the largesse of the venture capitalists, the car-subscription company Fair and software company UiPath have both downsized and the scooter renting company Lime has rearranged its operations – all to try to prove that they can turn a profit. That’s been a real problem with the recent unicorns that Silicon Valley has produced during the past few years. Chris Douvos from Ahoy Capital states is this way: “We’ve been in the middle of a rollicking party that’s gone on for five years and someone has snapped on the light switch.” Yes, indeed – that would be the potential investors who have been insisting that the newly-founded companies do that old-fashioned thing of showing a profit after a reasonable period of time. Douvos goes on to say, “We are all adjusting our eyes and no one has any idea how the rest of the night is going to go. That’s how Silicon Valley feels right now.” Well, I’d suggest that everyone go home, get a good night’s sleep, and come back with far more realistic planning in the clear light of day. The problem is that the start-up industry is awash in cash – so there is the temptation to throw it at just about anything that moves. Hopefully, the newly-found “soul searching” will result in all sorts of changes, including stricter corporate governance. We’ll follow and determine if, or when, there’s progress that has been made.