I have to admit, it is great to see the initial public offerings of various technology companies come to market and create a level of excitement. Lyft, Uber, and Pinterest are hogging the headlines, but they are also helping to kickstart the financial engine that makes Silicon Valley hum. Of course, not everyone is enthusiastic. If you read the popular press, you might get a feeling that the IPO parade is made of money-losing companies, and this is just like 1999. You might also come across articles about the soon-to-be millionaires who will ruin everything in San Francisco. (The Bold Italic estimates that we might see 6,000 or so new millionaires added to the million or so already in that special club.)
I understand why there is general unease, but let’s not forget about the inevitability of the Internet. We have willfully enslaved ourselves to the network, and the convenience and sloth it brings right into the palm of our hands. The offerings, or IPOs, for me, are a great way to get a reality check on the valuations of startups (a misnomer, given the size and scope of these companies) and, if you please, unicorns that are tapping the public markets.
There is a ludicrous gap between the world of private market valuations, and what the real market thinks they are worth. At times, private valuations are works of fiction worthy of Tom Clancy. We saw this movie play out with SnapChat, and we are seeing it with Lyft, which is on its way to finding its true worth. When that happens, they will need to work hard at becoming a company that can survive as a business.
Perhaps then, we will finally learn to respect the likes of Zoom and PagerDuty, which do important work without generating constant headlines or frequent mentions in the monologues of late night TV hosts. In startup land, we all choose to believe in endless growth, the up-and-to-the-right curve, and the horizonless promise of perfection. But reality has a way of ripping the horn off the unicorn.
This first appeared on my April 14, 2019, weekly newsletter. If you like to get this delivered to your inbox, just sign-up here, and I will take care of the rest.