Start-ups living in a fairytale and many unicorns predicted to perish

16 Mar 2015

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Bill Gurley speaking at TechCrunch Disrupt NY 2013. Image via TechCrunch

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With the term ‘unicorn’ being used to describe high-valued start-ups these days, it may have been used in a rather grim image after investor Bill Gurley said there will be many ‘dead unicorns’ this year.

Speaking at this year’s South by Southwest (SXSW) in Austin, Texas, the tech investor behind a number of some of Silicon Valley’s fastest-growing and ambitious start-ups – most notably the likes of Snapchat, Uber and Dropbox – felt that while there weren’t the same fears of a burst bubble similar to what became of the dot-com era, there are signs that there might be too much money floating around for it to be sustainable.

According to Fortune, the number of ‘unicorns – start-ups valued at more than US$1bn – is growing at such a rate that it is inevitable that a number of these will crash and burn by the end of this year, describing it dramatically as, “I do think you’ll see some dead unicorns this year.”

The leading factor behind the inevitable number of failures, Gurley said, is due to the “complete absence of fear” seen among the founders of many of these start-ups and that now, more than ever, the number of employees working for loss-making start-ups is the highest it has ever been.

Perhaps most worryingly for those living anywhere near Silicon Valley, should the vast amounts of capital that are flowing into these companies suddenly dry up, the entire area and San Francisco will be left reeling for years given the exponential rise in real estate prices that have come as a result of this latest boom.

Unsurprisingly, Gurley said that start-ups need to have a back-up plan ready if things were suddenly to fall apart that would get them back on-course in the shortest time possible, something which he says is almost totally absent from start-ups led by younger generations.

“The best entrepreneurs already think that way. The younger ones don’t,” he said.

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Colm Gorey is a journalist with Siliconrepublic.com

editorial@siliconrepublic.com