How NOT to Lead

CHAPTER 13Don't Chase Unicorns

There are some who went off in search of unicorns but found only rhinoceros.

—Laurent Binet, The Seventh Function of Language

First of all, let's clarify what is meant by a unicorn in this context. We often hear about technology companies being unicorns when they reach the billion‐dollar valuation. Most of those unicorns experience exceptional valuations that are speculative at best. That valuation is a gold sticker for the founders and investors involved in getting those companies to that level, but the actual value of the companies usually isn't a billion dollars. Various business journals list roughly 260 members of the Unicorn Club in the technology space.

The horn those unicorns wear is an emblem of their achievement of the magical billion‐dollar mark, but when one does the math, the magic quickly burns away like so much cheap smoke at a Vegas off‐strip magic show. Stanford professor Ilya Strebulaev applied a correct economic model to the unicorns listed on Crunchbase and found that, on average, the shares of those companies were valued at 60 percent above the fair market price. So, more than half the unicorns in the stable are just horses with funny appendages.

Startup success and failure are common in all industries, especially the tech industry, due to its dynamic and competitive nature. Many startups, including unicorns, face challenges; but some overcome them and continue to thrive, while others may not be able to sustain their initial ...