(Note: This was originally published on Medium on April 8, 2020)
In startup land, where most startups fail, a company that gets to a valuation of over $1 billion is called a unicorn, signifying the rarity and almost impossible odds of making it this far and this big. It’s certainly cause for giddy investors and the company to celebrate. This is the holy grail for most investors and entrepreneurs, ever on the hunt to fund or build the next great unicorn.
Ask a child what a unicorn is, and they will likely gush, “a beautiful and magical creature!”. It’s the stuff of their dreams and wildest imaginations.
Ask a venture capitalist and they will likely drone, “a statistical outlier”. Nevertheless, it’s also the stuff of their dreams and wildest imaginations.
Leave it to us adults to suck the magic out of everything!
Building a unicorn is bloody hard, and folks that manage to succeed and build such companies should be applauded. At the end of the day, they have figured out a great solution to a pressing problem at scale, and are (hopefully profitably) providing a product or service to serve the need of many customers.
However, I do find it concerning that over recent years, thanks in large part to the media’s incessant peddling of startup porn, being crowned a unicorn has become the ideal of success for most investors and many entrepreneurs. I can understand why investors pursue unicorns — they need high returns to stay in business and raise their next fund. Startup returns obey power laws, meaning only a few companies will generate most or all of a fund’s returns. So investors need at least a couple mega-hits to generate good returns to make a successful fund.
However, this may not be the best path for a lot of entrepreneurs. It keeps one focused on the wrong thing, leading one to optimize the wrong things. Growth, growth, growth and more growth. Growth is good — it means you’re stretching and doing something right. However, beating the drum of (usually hyper) growth for growth’s sake is where things can go awry. Now you’re just busy chasing ghosts in the form of arbitrary revenue/adoption milestones, while likely also saddled with the high expectations that come with outsider money.
You become focused on the wrong thing — your growth. And the more money you raise, the faster the growth treadmill spins. No matter what the company may say about their customers, employees or community, growth becomes the priority and everything else takes a backseat. This pursuit of (usually unsustainable) growth can come with some ugly consequences, some common, some unique to such companies — see “WeWork Isn’t Solving Its Biggest Problem”, “What went wrong at Uber”, “How a Hot $100 Million Home Design Startup Collapsed Overnight”, “Zenefits Scandal Highlights Perils of Hypergrowth at Start-Ups”, “Reflecting on My Failure to Build a Billion-Dollar Company”, and “Hypergrowth enterprises: A not-so-rosy picture” for some examples.
Many would argue that startup = growth, and those that fail or flame out on the way are collateral damage in this game of high risk, high reward. The ones that do make it and survive, reap massive success and can become great companies. For every WeWork, there’s a Facebook and Twitter. ‘Startup = Growth’ is also the title of a 2012 Paul Graham essay that opens with “a startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup”. The goal of a startup is to grow rapidly and to grow big, which is precisely the reason VC’s like startups, because it allows them to get their capital back sooner. .
This has been the conventional wisdom in Silicon Valley and the general mantra of the VC-fueled startup ecosystem. Startups are founded to grow and scale at a breakneck pace into hopefully massive behemoths one day. Again, this makes a lot of sense from an investor or VC standpoint, as this is the path to explosive returns. So this high octane, high stakes option will always be available to entrepreneurs that find it’s allure appealing.
If you’re not into extreme sports however, all is not lost. In fact, I would wager a large majority of entrepreneurs aren’t seeking a do or die thrill ride.
I also believe great companies can be built without all the fuss and drama. Sure, there are growing pains to be expected no matter what path you take, but I’m more and more skeptical that full pedal to the metal is the only way to building great companies.
As I said earlier, while I applaud growth, I’m not a fan of growth for growth’s sake. The latter is a very self-aggrandizing approach to business as it’s all about your growth. The worship of unbridled growth and the goal of being as big as you can be, will come with consequences, as anything perceived to be in it’s way will be sacrificed, whether it be your people, customers or community.
Growth will come. Not because you’re constantly seeking it out like an obsessive madman. Growth will come as an outcome of building a business that serves a higher purpose. Growth will come as an outcome of delivering happiness and something magical to customers. Growth will come from you loving what you do everyday, and pouring that love into your products and services. Growth will come from having partners working along with you on a magical journey rather than just employees or associates. The problem with growth at any cost is that it always has you living in an illusory future where you’ll finally have grown fast enough and be big enough to be whole. The problem is that future will never come, you will never be satisfied. That’s the problem with always wanting more, you’re always left wanting more. The magic is in the journey because 99% of your time is spent there, building, creating, solving problems.
I’d like us to redefine and bring back the essence of the word unicorn to business and startups. That essence is magic, awe and wonder. Your mind will never understand this but your heart will instantly feel it. Let growth be the consequence of building a magical company and products, rather than a good company or products being the consequence of chasing relentless growth.
What does it mean for a business to be magical? When you build something that is deeply meaningful to you, something you have fun doing and love tremendously, with the intention of creating a masterpiece or plain ‘wow’ — the end result will be magical and awe-inspiring to the outside world because it will have the unique imprint of your heart and soul. I’ve written at length about this topic and what it means to follow your heart and apply it to your business. It comes back to the simplest things such as intending to love and enjoy what you do. The mind struggles with this because it craves complexity, frameworks and hacks, but the heart immediately recognizes the truth behind the simplicity.
“The lessons are often that people are incredibly passionate, their mission driven people, they want to make an impact in the world, and they deeply care and obsess about just creating something great cause you have to.”
— Brian Chesky (Founder and CEO, AirBnB) on why some entrepreneurs are so successful
“At the end of the day, as long as you separate the two, you’re not making music with business in mind, because at some point it has to be real when they touch it, when they listen to it, something has to resonate with them that’s real. When you’re in the studio, you’re an artist, you make music. And then after you finish, you market it, get it to the world, I don’t think anything is wrong with that.”
— Jay-Z (Rapper, Songwriter, Producer, Businessman)
Create your unique music. We need more businesses that create magic and feel magical. Businesses with purpose that are led from the heart and offer products and services carved from passion. Businesses that can thrive in all regards — profits, and impact to all stakeholders — people, customers, community, society and shareholders (I’ve written more here on how more businesses can do this).
In short, we need more unicorns.