Prohairesis

Musings of a mostly quiet professional 


The Myth of “Unicorn” Startups

CBInsights indicates that the world of commerce is currently home to 255 “unicorn” startups. “Unicorns” are business startups that are self-valued at one billion dollars in United States Dollars – at least they’re almost always valued in USD to keep measures of valuation equal throughout the third rock from the Sun.

How is a company valued at $1 billion, anyway? Does that mean such companies possess one billion dollars’ worth of assets? What if they don’t command the control of $1 billion in total assets but have, in fact, been given $1 billion in the form of investments by angel investors and venture capitalists  – does that make a startup eligible for the sought-after “unicorn” status?

In the same manner that unicorns aren’t real – they’re merely mythical creatures created by the imagination of people living some 2,400 years ago and have never been found to exist since then – startups labeled as unicorns are more than what meets the proverbial eye.

Understanding how valuations of young startups work is essential to understanding the processes by which unicorns can be considered unicorns

Startups practically always receive substantial investments from alternative asset management firms, private investors, venture capitalists, and angel investors. Without such investments, startups wouldn’t typically be able to achieve the massive scales of growth they frequently do.

Executives, owners, and founders of these startups present the basics of their businesses to private individuals and rooms chock-full of investors to receive such investments. Startups typically seek out investors who have recently poured money into ventures that match their industry – chronic manufacturing-oriented investors won’t pay the same for a tech startup as they will a blue-collar-oriented startup.

Startups are never valued independently – their self-purported values are only true when believed by investors.

Many startups have no revenue

That’s right – countless unicorns are valued as such before making any material earnings if earning anything at all!

One reason why  so many startups are in Silicon Valley is that investors located there are more likely to fork obscene amounts of money over. The same goes for Los Angeles and New York City.

Unicorns get many things right – including selling their pitches at the right time

Startups that can tout consistent monthly increases in performance-related metrics typically go all-out as far as their efforts in presenting investment opportunities to potential funders. Prospective unicorns – at least successful ones – always pitch at the right time to secure such an illustrious title.

The Future of the Tech Capital of the World

One might be curious what Silicon Valley will look like in the future. Will it be a giant tech bubble that bursts with countless tech companies buried in their graves, or will this prosperous region in the United States continue to be a land of innovation and opportunity for decades to come?

Innovation Changes Hands

What people have to understand is how innovation has switched cities from time to time. For example, Springfield, Massachusetts, a small town that was smaller than the surrounding cities, sat at one of the most enviable crossroads in trade routes.

Because of its location, Springfield became a weapons manufacturing hub for the United States military. The city drew in some of the best talents from innovative companies. Up until the 1950s, Springfield was the heart thumping pulse of innovation in the United States.

What Happened? Does History Repeat Itself?

Before this time, the city was at the forefront of technological advancements. Sadly, when the 1960s rolled around, eastern manufacturers began to produce cheaper products and the local armory was shut down. This booming city turned into a shadow of its former self as manufacturing companies went out of business and became empty and dilapidated ruins of its former glory.

What Does This Show?

This isn’t to necessarily say that Silicon Valley will lose its title as the giant innovative city, but it shows how fragile this title of innovation can be. No one can predict the future. However, new things come up the pipeline to change how current things happen, and this can lead to a shifting of power. It was only 50 years ago that Silicon Valley became the mecca of the tech world, but some other region in the world could develop and attract the attention away from California.

What history has shown is how power changes hands occasionally, and what was once the economic beating heart of a nation can suddenly lose its power. The tech industry moves in cycles like most of the industries, and it has less to do with the economy over what it has to do with newly emerging technologies.

To give an example of how this works, take a look at the once powerful dot-com companies. When the dot-com crash of 2001 hit, the once prosperous companies like Cisco lost as much as 86 percent of their value. These examples go to show that Silicon Valley might not be as indestructible as what the average person thinks.

The takeaway? Well, it’s certainly not that Silicon Valley doesn’t have much to offer. Instead, focus on your talents, skills, and how you can tangibly implement them in the here and now. The location of talent may change, but developing your talent and working hard is the one true constant you can hold onto in the ever-evolving world of entrepreneurship.

Hope Outside of the Bay Area? The Modern Fluidity of Entrepreneurship

At this point, entrepreneurship and Silicon Valley are synonymous with one another. To the extent that many view the separate consumption of peanut butter and chocolate as a mortal sin, so too do people see the separation of startups and silicon valley as impending doom for the former. Listen, I don’t have to make an argument for the staggering success of entrepreneurship in Silicon Valley, its immense benefits for the country and the world as a whole, or the fact that talent abounds there. My goal is not to dismiss anything about the Bay Area, but whether to explore whether it is possible to posit other cities as promising and proven hubs for entrepreneurship, too.

In a digital world that is becoming increasingly flexible, it shouldn’t be a surprise that many are wondering if their business can thrive outside of the technologically-oversaturated Bay Area of America’s 31st state. Just as workers long for more flexibility, so to do startups founders and CEOs long for more geographical fluidity.

Are There Any Other Worthwhile Cities?

Californians often fall into the fallacious thinking that they are the only state in the country (or at least the only one worth living in if you wish to succeed) but the truth is, a lot of places are thriving — even places in the middle of the country. So, to name a few:

Richmond, Virginia

Yes, you read that correctly. Richmond has been on the rise for the past couple of years but was slow moving due to a lack of education. However, the current environment is one of bustling energy with an “on the come up” feel. The city is beautiful, historical, quaint, and looking to emerge on the entrepreneurship scene as a city that blends its historic roots with the exploding age of modernity in an unprecedented fashion. In fact, the town hosts the startup accelerator Lighthouse Lab, run by Larkin Garbee. The city also has an impressive art and culture scene, establishing itself as a hotbed for activity on the east coast.

Cincinnati, Ohio

In the past couple years alone, Cincinnati has seen a startup growth rate of 74%. Something unique about this city is its ability to draw in a host of different types of startups – everything ranging from Silicon Valley tech-style startups to advertising agencies and health and data companies –  you can find it all in the home of the Browns. I wouldn’t be too surprised if journalists started to mention Cincinnati in tandem with Silicon Valley.

Oklahoma City, Oklahoma

Combine the strong, small business feel with the added benefit of a lower cost of living, and you have Oklahoma City. Not only is this city listed as one of the places with affordable luxury apartments, but it also offers the ease of paperwork for starting a business – one can finish the paperwork in about a day. Oklahoma City is a great place for recent college graduates trying to make a name for themselves, as well as anyone who wants to get out to the home of the Sooners and make something happen.

Someday, Entrepreneurship: Tips for Those On the Come- Up

Sure, developing that perfect resume, optimizing your Linkedin, and diligently applying to jobs that interest you are all highly effective ways of marketing yourself as a professional in the career sector you desire to enter. But what if you feel called to something deeper than the ‘typical’ job? What if the entrepreneurial spirit is not something you can disassociate from your innovative and enthusiastic will?

If you wish to capitalize on your business-centric mindset, you may need to start thinking outside of the box to make valuable connections and business relationships. And while you shouldn’t slack on the basics, you’ll want to focus on integrating yourself into the local community, positioning yourself as an innovative thinker, and taking those extra steps to elevate yourself as a cut above the rest of the crowd.

Constant Community Integration

Perhaps the best way to learn about entrepreneurship is to learn from business owners themselves. Now, this doesn’t mean you have to hunt down a curated group of digital darlings and media moguls. Simply finding people who work for themselves, especially those that operate in a relevant industry, is an excellent way to familiarize yourself with entrepreneurship. Not only is this an excellent means of gaining invaluable insight, but it’s also a great way to meet people of power who can help you along in your business dreams and ventures.

Getting out to your community events, joining groups on various social profiles, and positioning yourself as someone who is willing to learn and willing to offer a helping hand is crucial throughout this process.

Don’t Buy Into the Hype

Most people are overwhelmed by the business world, especially when they think about themselves as the leader of their own business. But it’s important to demystify business-talk if you wish to enter entrepreneurship with confidence. The truth is, owning and operating a business is not as mysterious and evasive of a process as some people tend to think. This is also another reason why immersing yourself in the business culture is important; it’s not as difficult (in some aspects) as some say.

There are also many great, free platforms to learn the ways of business if finding a mentor is currently out of the question. Forbes.com, Harvardbusinessreview.org, and entrepreneur.com are a few great sites that serve as an excellent source of insider business knowledge.

Success – thought it might appear as such from an outside perspective – is not an overnight process. Taking these simple but important steps towards your entrepreneurial future certainly won’t ensure you obtain all of your future business dreams, but they will certainly help prepare and instill you with the needed confidence, knowledge, and wisdom.

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