TheFantasyWorldoftheBillionDollarClub

Ihopeyou'renotbusyforaboutamonth...
ManStoner,UpinSmoke,Paramount,
1978

Therewasatimewhenacoupleoflateteen/earlymillenniumswouldget
together,maxouttheircreditcards,borrowfromtheirparentsandanyonewho
wouldlistentothem,work(andsometimessleep)inagarageandemergewith
thenextgreatidea.
Notanymore.
Now,theyseewhatsomeoneelsehasdonegiveitanewtwist,newcoatof
lipstick,anincomprehensiblenameandtrotofftoSandhillRoadand/orotherVC
(venturecapital)organizationsaroundtheglobetocollectafewhundredmillion
sotheycanstartoutinstyle.
Whataretheyworth?
Billions.
Whathavetheysold?
Well,theyclosedafewordozenVCdealsandhaverisentotheeliteunicorn
status.
Isntentrepreneurshipgrand?
Unicornstatuswasinitiallybestoweduponthecategoryoffirmsvaluedatover
$1B.

Today,thelowendis$10Bandentryintheclubwillprobablyriseto$100Bin
notime.
Andjustthink,wecancreditthisalltotheiNetthatspeedsinformationaround
town,aroundtheglobeintheblinkofaneye.

GlobalContact
TheInternetmayhavebeendesignedasameanstohelpengineers,
academicsandscientiststoexchangeinformationmorerapidlybutithasquicklybecome
thetoolofcommerceandthewayfolkscommunicateacrossthetable,acrosstownand
acrossvastoceans.Innotime,youcanexchangenews,data,imagesbuy/sellgoodsand
makeafoolofyourselforinsult/abusepeopleyoudontevenknowwithaclickofthe
mouse.Itsfantastic.

Ifitwerentfortheused,abused,misusedInternettherewouldbeuttersilence.
Instead,everyminute:

10Madsaredisplayed

500Ktweetsaresent

7Mmessagessent

3.5piecesofcontentshared

100hoursofvideouploaded

6.9MFacebookmessagessent

$134KAmazonsalesmade

1,572,877GBofIPdatatransferred
Andintwoyears,therewillbe3xmoreconnectedthingsthanpeopleonEarth.
Wellbedriving13xmoremobiletrafficanditwillallproducemorethan5ZB
(Zettabytes)ofdatathathastobestored.
WhenPedrowasaskedhowlongitwouldtake,hesaid
Aweek.Imeanaday.Aweekday.

AllonthelowlyglobalbackboneandtechnologythattheUSgovernment
initiallyfunded.
Nowondereverygovernmentfeelsentitledtolisteninandseewhatsgoingon.
Exceptfortheunderappreciatedhardware,softwareandserviceprovidersitsa
regularmoneymakingmachine,sowhynotinvest
big!

Up,UpandAway
Newstartupsgetfundedalmosteverydaybecausetheyhaveanew
idea,newwaytointerest/attractpeoplethatwillmakealloftheearlystageinvestors(and
earlyemployees)amazinglyrichforonlyafewhundredmilliondollarsinvested.Fundsare
rushingtogetonthetableearlybeforethestakesgoup.

Ofcourse,notallofthemwillsurvivetogopublicbutVCsdontcare,whichis
whytheyinvestin10orsoofthesamething.
Ifthecompanyburnsthroughthepaltry$40$80Mtooquickly,noproblem
theysimplygobackanddipintothemoneywellwithanevenbiggerideaand
theyregoodforanothercoupleofyears.
Afterall,lookattheirvaluation.
Besides,theyreprivatefirmssotheydonthavetoplaybythesamerulespublic
companieshavewiththingslikequarterlyfilings,SEC(SecuritiesandExchange
Commission)documentslikeauditednumbersofrealusers(notdeceased,one
timers),realtraffic(notbots),revenuesandburnrate(howfastyouregoing
throughthestashofcash).
Thatsoneoftheperksofbeingprivatevs.public.
Youdonthavetotellthema****thingifyoudontwantto!
Sofolkscanlettheirimaginationsgowild
andtheydo
.
Beautyisintheeyeofthebeholder,sogetinbeforethissuckagoesballistic.
NoneofthemheardManStonerswarning,
Hey,heydon'ttakethose,man.
Ofcourse,itmaynottakeoffbecausehistoryhasanuglywayofrepeatingitselfinbusiness.

ThatsSoYesterday
Whiletheindustrymayhaveexperiencedabubble/burstsituationa
fewyearsago,theresnoreasontothinktherapidadvanceofunicornfirmswillencounter
thesamedisaster.Ofcourse,theresnoreasontothinkitwonthappenagaineither.
Backin19992000,wehadthisthingcalledthedot.combubble.

Itwasabeautifulthingpixiedust,rainbowsandgoodtimesthatwouldgoonforever.
Untiltheydidnt.
Backinthosedays,peoplewerebettinghugesumsofmoneyonyoungcompaniesrunbyfolks
withnotrackrecordinbusinesswhofounditfunandeasytospendthechunksofcashpeople
gavethem.
Talkingabouttodaysenvironmentbutsoundingalotlikethe90s,BillGurley,aVC,toldthe
SXSW(SouthbySouthwest)folks,
ThereisnofearinSiliconValleyrightnow.Acomplete
absenceoffear.
Ofcourse,thereareentrepreneurswhodidnttaketheeasyroutetogettingtheirideasoffthe
groundandgrowingtheirfirms.
TakeDaymondJohn,of
SharkTank,
andLarryOConnor,ofOWC.
John,of
SharkTank,
startedaclothinglinecalledFUBU(ForUsByYou)withasecond
mortgage
onthehouseheandhismothershared
.HelikestolookatboringthingslikeCOG
(costofgoods)andsales,marginsinsteadofnebulousnumberslikesomehowgettingone
percentofa$50Bmarket.
Hedoesntthinktheideaofdropping$1Mon100untested/unprovencompaniesormanagement
teamsisareallyswiftmove.
Beinginlinewithcomparablesinthemarket(revenuesandspending)doesntmeanmuchwhen
themarketcorrectioncomesanditwillcome.
Actually,hecallsitdumbmoney.
Likemostsuccessfulentrepreneurstoday,bothJohnandOConnorhadanidea,believedinit,
andfoundawaytomakeithappen.
WhenhewastuningApplecomputersbackin1988,OConnorthoughtimprovingsystems
wastooexpensiveandsomethingmostuserscoulddothemselveswiththerightstuff.He
startedOWC(OtherWorldComputing).inhisfolkskitchenandbarn.
HecontinuedgrowingtheproductlinesfortheApple,AppleIIandbeyondsystems.Today,he
andhisteamfocuseongoodproducts,customervalue,customerserviceandohyeah,
retainedearnings.
Fortunately,therearealotofgreatfirmslikeFUBUandOWCtodaythathavedeeprootsand
resistthetemptationofthefast/easymoneyroute.Theyalwaysremembertheirfirstsale,their
firstcustomerthatlaunchedthecompany.
Privateorpublic,theyknowitsaboutthecustomer,notthedeeppocketfolks.
PedrolookedatthequickandeasyVCfundedapproachandsaid,
Kindalookslikea
toothpick.
Ofcoursethereisanotherfactortoconsiderglobaleconomiccyclesthatoccurregularlyas
marketsadjusttotryandequalizesupplyanddemand.


UpsnDowns
Sinceperhapsthebeginningoftimetherehasbeenanimbalanceinsupply
anddemandwhichheldswayoverthepriceofgoods,productsandservices.Excess
demandproduceshighercosts,higherprofitswhileexcessproductiondrivespricesand
profitsdown.Thatmaybewhytheyrecalledbusinesscycles.

Forexample,whentheresashortageoftechnologyproductsflashmemory,
harddrives,CPUs(centralprocessingunits),GPUs(graphicprocessorunits),rare
earth,younameit,demandandpricesgoup.
Togettheirunfairshare,firmsrampuptheirproductiontotakeadvantageofthe
demandandincreasedmargins.
Thensuddenly,theresaglut.Pricesgodowntokeepthelinesrunningand
marginsdisappear.
Ithappenswithalmostboringregularitybecauseitsaconstantguessinggameas
towhatshot,whatsnot.

Ofcoursethatwillneverhappenintherarifiedgamewereplayingtodayyouknow,giant
sumsofmoney,skyhighvaluationsandeveryonelookingtoscorewiththenextblockbuster
company.
Ohsure,forsomeitwillendbadlyandforscoresofothers,ithasbutmostassuredlynotwith
theoneyoureinortheoneyourmutualfundisinvestedin.

Afterall,everyoneknowsunicornsdontreallyexist,sohowcouldthey
disappearordie?

Beautiful
Yes,weadmitunicornsdolookbeautifulinourdreamsbutunfortunately,at
somepointintimewehavetowakeup.Andwhenwedo,thepixies,mermaidsandunicorns
disappearsoasmuchaswedlikethemtoexist,weknowtheyreallydont.
ManStonerlookedatwhatwasgoingonandsaid,
Ithinkwe'reparked.