Stampede of the unicorns: will a new breed of tech giants burst the bubble?
Lyft, which went public on Friday, will soon be joined by Uber, Airbnb and other companies valued over $1bn – and they may be just the animal to burst a bubble
By Dominic Rushe
Mar 30 2019
Five years ago Aileen Lee, founder of Silicon Valley investor Cowboy Ventures, coined the term “unicorn” for a private company valued at more than $1bn. Back then unicorns were almost as rare as their mythical namesakes – just 39 existed, according to Lee. Now there are 334 around the world, worth more than $1tn. And this week some of the very biggest beasts started stampeding towards the public markets.
On Friday Lyft, the ridesharing company, went public on the US stock markets, soaring 21% before ending the day up a more modest 8.7%. The company is now valued at $22bn, creating many new millionaires among the Lyft staff and generating big profits for investors who have backed the business as it has developed.
Soon it is expected to be joined soon by Airbnb, Palantir, Pinterest, Slack, Uber, WeWork and more than 200 other companies, largely in tech, that could raise over $1oobn between them – more money than was raised by the dotcom bubble at the turn of the millennium.
For some that’s a worrying sign. And if there was ever an animal born to burst a bubble, it’s the unicorn.
There is no doubting that the big names coming to market have built impressive profiles and are growing rapidly. More than 30 million people took a Lyft last year and 1.9 million drivers are using its app. Not bad for a six-year-old company.
Many of the names coming to market, notably Lyft, Uber and Airbnb, were part of what was once called “the sharing economy” – a phrase meant to describe a community-based, tech-enabled system for sharing goods and services. It’s a phrase that has gone out of fashion as these increasingly massive companies have come to dominate their sectors.
Douglas Rushkoff, author of Team Human and Throwing Rocks at the Google Bus, sees close parallels to the first wave of tech companies to go to public at the turn of the millennium. “What we are looking at is the reaction of traditional corporate capitalism against the sharing economy,” said Rushkoff.
Just as Amazon became the online retailer and Facebook came to dominate social media, “couch-surfing became Airbnb, ridesharing became Uber. It’s capital coming in, establishing monopolies and changing the laws in order to establish a monopolistic foothold,” he said. With all this initial public offering (IPO) cash, competition will once again be killed, he warns.
But Wall Street seems excited. At least for now.
“Investors are familiar with these names, there is a lot of buzz about them and they see the rapid growth. They are doing many of the things that investors like,” said Kathleen Smith, principal at Renaissance Capital, a research firm that specialises in IPOs.
Renaissance reckons there are some 235 IPOs in the wings this year – many of them unicorns – that could raise $100bn between them, eclipsing the $97bn raised by IPOs in 2000.
Back then, when the internet was new, investors also lined up for a piece of the action and then an economic downturn, the 9/11 terrorist attacks and broken business models triggered a huge sell-off. By the time the silicon had settled in October 2002 the Nasdaq-100, home to many of the largest tech companies, had fallen 78% from its peak in March 2000.
Many of today’s biggest tech companies, including Google, eBay and Amazon, can trace their roots back to the dotcom boom. But beside those market-dominating behemoths lie the bones of much-hyped disasters such as Pets.com and Webvan.