Name: This Is Why Unicorn Startups Are in Trouble
Uploaded: 2016-01-21
Duration: 2 min 25 s
Description: Erin Griffith explains in our latest Fortune Tech Debate.

[ MUSIC ] Last years tech IPO market was ugly leading people to ask, is this the end of the road for the unicorn? Erin what do you think? So the start up unicorns that are worth a billion dollars or more, they might not be going extinct in 2016, but I do think they're gonna have a really tough time We're gonna see a lot of down rounds. We've already started to see some of those and that is being driven mostly by the fact that the IPOs were so bad. Only six tech companies, Tic Tech Unicorns went public last year. And most of them are now trading public this year and most of them are now trading at below their last. As private valuations which tells you that investors you know overvalued these companies and that the real rational public market valuation is actually a lot lower than what people thought Look I will agree with you that ipo market was rough but at the same time lets think about this. You know the entire economy is kind of in trouble the that tech market is down largely across the board and in fact so is the global economy so the way I see it We shouldn't pin this on the unicorns alone. I'm not pinning it on the unicorns. The problem is that they are valued based on the fact that they are going to grow. They don't have profits right now, so right now investors are assuming that okay they are going to grow into these very high valuations. If the entire global economy is in a free fall, I don't think that the growth is looking as. as sure of a bet as it might have when they made these investments a year or two ago. Yeah but the flip side of that growth coin is the fact that maybe we shouldn't be judging them so quickly. Right? All of these companies are investing in growth. They're going after users, customers whatever they call them And they're not going after the p word, profit. So it is a little bit unreasonable even though some of these companies have gone public, or are newly public, or just about to go public, that we should be judging them so early? I don't think so. Well, I think in a term in sort of decline, people are going to go back to the fundamentals. And the fundamentals are profits. Right now these companies are trying to forge new business models, but the problem is Maybe those business models actually aren't proven. And they've already raised hundreds of millions of dollars, they're worth supposedly billions of dollars, and they don't quite have the fundamentals down. That's giving investors who came in, allowed them to stay private for longer. Gave them huge evaluations and huge amounts of money, expecting them to go public in the next few years, and now they're gonna put it off even further. That's giving a lot of people pause. That's a fair point. For one show with lots of potential, come to fortune. com for more tech debate. [ SOUND ] [ BLANK_AUDIO ]

This Is Why Unicorn Startups Are in Trouble

Erin Griffith explains in our latest Fortune Tech Debate.