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Monday Postcard #222 – Crashing Unicorns

Monday Postcard #222 – Crashing Unicorns

Monday Postcard 222 Crashing Unicorns

In 2014, I received a link to a Youtube video. “You have to watch this, this woman is amazing,” the message said. I opened the link and it led me to an interview with a blonde woman, dressed in a black turtleneck and a baritone-voice. You may have guessed, it was Elizabeth Holmes, then founder of the biotech-startup Theranos. But in contrast to most of my peers in the start-up scene, I felt uneasy watching her interviews. (I shared more about this in Postcard #103)

I had just left my corporate job to found a tech start-up in Hong Kong. It was the peak of what I call the “app bubble”. Everybody tried to solve problems with mobile applications – from banking, to shopping for groceries, to booking flights. I was part of it – our app motivated users to workout with an online game. It was really exciting, the energy in Hong Kong back then was crazy and I met so many interesting people. At the same time, I also met some who were just riding the wave and not really selling anything. I stopped counting the conversations with people who bragged about their deals with angel investors (i.e. the very first investors in a business), yet many of them did not have a functioning product, or even prototype. Money was hot and tech was – and to a certain extent still is – attracting a lot of interest and capital. 

Very soon, I withdrew myself from the startup events. When I started the business, I thought I had to attend as many of them as possible to build a network. But I realized that most of the people who were actually successful where nowhere near these events. (Guess what, they had to get work done and had no time to waste at startup events.) This was also the time of WeWork, the American coworking company and “unicorn” which was valued at USD 47 billion (!) in 2019. Coworking spaces came up in Hong Kong at every corner. I also rented a space in Sheung Wan, in Hong Kong’s city centre. I wanted to have an office outside of my flat, where I could focus on work. If you have seen the series WeCrashed, you know that actual work was not really part of the concept of coworking spaces. Every day, there was another event. After 6 pm, there were motivational talks, then the music was on, it was party time. For people like me and many other fellow tenants who took their companies and jobs seriously, it just ended up being annoying and a waste of money. I worked until 10 pm every day. Sometimes, even longer and I came to the office early. Every evening, the “startup crowd” swarmed into the space, got drunk and partied, while the real (but obviously boring) entrepreneurs were working their a***s off. 

But they all wanted to live the dream and grab a part of the money which could be made in tech. WeWork and Theranos just enforced the castle in the air. It seemed so easy – party, network and the big money was just one or two years away. I got increasingly annoyed when I got advice to act more like Elizabeth Holmes or Adam Newman, WeWorks founder. I did think that I had to sell myself and my company better (hello, imposter syndrome), but I never considered these two founders as role models. It seemed too good to be true and my gut feeling told me that they were not genuine. It felt that there was no real long-term business strategy behind their missions and the only way they survived was the enormous amounts of capital invested into the companies. 

In the end, my gut-feeling was right. Both, WeWork and Theranos, crashed spectacularly. Adam Newman still made a lot of money from it, but Elizabeth Holmes is currently waiting for her sentence for defrauding USD 140 million from investors. I have to admit, I watched the “WeCrashed” series and “The Dropout” with some satisfaction. (If you are interested in the Theranos story, I think the book “Bad Blood” by John Carreyrou is even better than the series. (I was not too convinced by Amanda Seyfried to be honest and I felt the series was a bit too biased.)) 

I still follow the start-up scenes closely. To a certain extent, I still consider myself part of it. But it feels like it did back in Hong Kong: Advice is given by people who have not really gone through the process of founding a business. I keep reading that “startups need to be supported”, but the solutions cannot be further from reality. When people think of “startups”, they almost immediately think of tech startups – Facebook, Google, Amazon. But when we look into the terminology of the word startup, it means something really simple: anybody who starts something.  It does not matter if this is a tech startup, a fashion designer or a baker. All of them are startups because they take the risk to start something on their own. It is probably “cooler” to take a picture in the sleek headquarters of a tech startup next to the founder who comes up to the cliché of a white male nerd wearing a sweater. But entrepreneurship is much more than the hunt for the next unicorn.

Therefore, my advice to all the leaders and representatives at the fancy startup conferences is to focus on real businesses. Forget the stupid talk about unicorns. As the name suggest, they are not real. There may be one or two big tech startups which succeed, but for a successful economy, we need more than just that. We need to be able to convince people to take risks, to leave their jobs, invest their savings and work hard to make their dreams come true. Politics does not create jobs, entrepreneurs do. But this path is a rocky one. It comes with countless barriers and problems along the way. Politicians need to actively listen to founders with real experience and we all need to be able to convince others to take this difficult path. Because in the end, it is worth it. But it takes more than just a fancy startup conference and pictures on social media accounts to achieve this.

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