Hunting Unicorns

Seems wrong doesn't it?

Once all our big customers had adopted Microsoft Teams (thanks COVID!) my old team looked for new areas to grow Teams usage. One strategy was hunting Unicorns. We ran this play out of India, which wasn’t my territory, so other than interest in the the name, I didn’t pay much attention to it. But lately I’ve been thinking about Unicorns.

These aren’t the Unicorns we’re looking for:

Unicorns are rare, but not as rare as a Rainbow Butterfly Unicorn Kitty¹.

Once a business startup reaches a $1B market valuation they are called a Unicorn. It used to be super rare, hence the hunt, but they’re not so rare anymore and our India team was able to get quite a few up on Teams.

If you never worked in tech or never watched Silicon Valley² Venture Capital is the way startups get funded. It’s a lot of Billions. VC funding hit a high water mark on the backside of COVID in 2021, investing nearly $700 Billion smackeroos in startups. Funding has dropped since then, but its back on the rise now with AI fueling new rounds of VC investment.

All that money handed out by a bunch of old smart farts to a bunch of young smart hearts, creates much drama and ridiculousness. The show Silicon Valley nails it. Check this scene where founders pitch insane products in the name of making the world a better place combined with acronym abuse. This is based on the very real annual VC conference called TechCrunch Disrupt! in San Francisco.

Here are a few Unicorn Graduates (gone public)

• Airbnb - stay in someone’s house and then pay too much to clean it.

• DoorDash - get cheap food delivered to your door but then it’s not cheap.

• Rivian - super cool looking electric Trucks, with ridiculous horsepower that look way better than the stupid Tesla Cybertruck.

Each of these companies now trade on the public stock market with valuations of $50B or more. This is how VCs cash out.

Coinbase is another graduated Unicorn in the crypto space. They’ve dropped nearly 50% in value since they went public in 2021 with all the carnage in Crypto but are still worth a ton. When I wrote Crypto Boy is Going to Jail, I mentioned how Sam Bankman-Fried (said crypto boy) duped the one of the top VC firms (Sequoia Capital) into funding him even though he played a video game while meeting with them. The difference between genius and evil is razor thin.

Here are a few Unicorns I bet you’ve heard of:

• ByteDance - Infamous private Chinese company that owns TikTok (the VC model is international), potentially on their way to being voted off the US island which I wrote about in Three Dumpster Fires.

• SpaceX - Rockets to Mars! 🚀and the moon and to other places we humans aren’t. They were dumpster fire #3 in that same article and they have a 5th launch coming up of their massive starship meant to populate the cosmos, where the launch engine is planned to safely return to Starbase for reuse, caught by giant T-Rex arms which I wrote about in The Need for Speed.

• OpenAI - makers of ChatGPT which started the current AI craze complete with controversial CEO Sam Altman who has a colored VC past himself getting fired from Y combinator in 2019. Y combinator is a, nay the Silicon Valley VC incubator for startups.

Here are a couple more that you may not have heard of but that I like a lot. Canva is an online suite of design tools that are super easy and capable and where I do most of the design work for Wirepine. Alma is an online platform for mental health care professionals.

These are but the tip of the iceberg. There are over 1,500 Unicorns on Crunchbase representing nearly $1 Trillion in VC investment worldwide.

In addition to wanting to click into how much VC funding was going into AI, I wanted to know if Substack is a Unicorn. Substack is the platform I publish Tech Tales on. Most of you just read it in your email, but Substack also provides a pretty website for my Newsletter including Archives and they also have an app for your phone where you can browse and read everything published on Substack.

Substack recently introduced a number features born out of Social Media. Substack Notes for example, is similar to Twitter. Substack has also introduced Podcasting capabilities and Video meant to attract a broader variety of creators from, lets say TikTok that’s in danger of getting banned in the US. These are all connected by chat services that feel very familiar from the time I worked on building like features into Teams.

Writers on Substack have a lot to say about these changes. Substack’s twitter-like Notes feature is mostly writers writing about writing. There is a lot of angst about whether this will corrupt Substack away from it’s founding vision as an ad-free platform committed to the success of writers. Substack’s current business model is a 10 percent commission of paying subscriber revenue. We’ll see how this plays out, but every startup has to eventually make money or the funding rounds stop and they go out of business. 90% of startups fail.

Substack has been in business for 7 years and has had five notable equity funding rounds, raising $90 Million. They have grown in a market of storytelling competitors like Medium and newsletter platforms like Beehiv. Substack cites 35 Million Active subscribers with about 10% paid at 3 Million. That’s nice growth. Substack aspires to a broad and dramatic vision - A New Economic Engine for Culture. Writers opine on their favorite platforms and destiny fast and furious on Notes.

I can’t tell if Substack is profitable yet, but I don’t think so. Companies that are profitable are happy to tell you about it. I can’t even tell you how much Substack makes. Back of the envelope guesstimate puts writer revenue at around $100M and Substack’s 10% cut would be $10M³.

Substack is not a Unicorn. They are currently valued at $650M.

Most of Substack’s funding has come from a VC firm founded by Marc Andreesen and Ben Horowitz called … Andreesen Horowitz. a16z is their cooler name and here’s their initial take on funding Substack 5 years ago. Andreesen uses Substack as a platform for his writing and other principals in the company do too. I like

Andrew Chen

’s writing - he’s the a16z partner fronting their investment in Substack. If the world of Venture Capital is interesting to you, give Andrew a follow.

While I am a fan of Andreesen’s Mosaic and Netscape browsers that helped form the Internet, I’m not a fan of his writing or politics. I mentioned Andreesen’s unhinged AI Techno-Optimist Manifesto in my article FOR IMMEDIATE RELEASE. That thing made me queasy. Andreesen’s latest is an initiative he calls Little Tech (ie startups) which has morphed into a way to support … Trump. No like.

Noahpinion

- an Economics blogger I like - wrote an article about this as a broader trend of Tech moving to the right. Elon Musk has been shaking his booty all over the internets about it too. Here’s Noah’s article but you can only read the beginning because it’s paywalled and that’s how Substack makes money (and Noah).

Some startup Unicorns that became wildly successful after going public like Facebook and Twitter tipped the scales from offering value to consumers to junking up their platform with ads to make money for stockholders, ending up on Enshittification mountain. For the most part I think Substack is pretty awesome and I hope they are wildly successful and stay off of that mountain. Nonetheless, I regularly export my articles and email list because, well … you never know.

Time for our Tech Tales cultural reference! Today I bring you … 1985’s Legend. We’ve covered Silicon Valley’s VC Unicorns but what about the real ones? 🦄

Nothing is more magical than a Unicorn and as long as they roam the earth, Evil can never harm the pure of heart.

Ridley Scott directed, Tom Cruise starred and Tim Curry played no other than the Lord of Darkness. The plot is simple - save the last Unicorns lest the Devil cast the world into eternal night. Super campy but also … awesome. If you do watch it, find the Directors Cut.

best, Andrew

1. Of course there is a TV show called Rainbow Butterfly Unicorn Kitty

2. Here’s the behind the scenes of that clip and if you are entertained spin up a season or 6 of Silicon Valley (I think it’s on HBO?) TechCrunch DISRUPT

3. I quadrupled and rounded up the highest earning newsletter list that’s published Substack User and Revenue Statistics (2024)