Silicon Sellers

Vérone Mankou
Vérone Mankou

In Analysis Posted on

Silicon Valley Bank has recently published an interesting study that shows that the trend in Silicon Valley is to fatten the startups before selling them. And, this affects 1 startup out of 2 : this is normal because many startups fail to convert their “buzz” into “cash money”. This trend is fueling, every year, the famous debate on a “new Internet bubble”.

This debate is understandable when one knows that a company like Twitter, whose popularity and impact no longer  need to be demonstrated, is struggling to make money despite the euphoria that followed its IPO. Today it is capitalized “only” $10 billion with shares traded around $15, $13 in June 2016 … and we are far from the $69 in 2013!

 

The share price of  TWTR (Twitter) since its IPO

 

If a big company like Twitter does not become a real cash machine as its shareholders hoped, it is difficult to see some startups become profitable despite the millions of dollars invested. And obviously, they have only two options : sell or die … the third option is reserved for real entrepreneurs or those well advised : to persevere. But here again, this is a very difficult parameter since many startupers are not entrepreneurs and especially in Silicon Valley (do not ask where I’m going from here because it’s an open secret).

“Selling” is an option that has succeeded for many who made that choice rather than seeing their projects die because of lack of funding or lack of a real ecosystem. Among those who have chosen this option (and have succeeded), there are WhatsApp, Oculus, Android, YouTube, … to name but the most symbolic of them. But beware ! Not all sales have been successful. There are also many examples but I keep in mind the case of MySpace (the ancestor of Facebook) and Nokia (probably the worst deal of Microsoft : that’s my opinion).

“To persevere” is the choice made by true entrepreneurs ; those who have a vision and who move forward against the winds and tides. I could quote Amazon who held 8 years in the red (is it a legend?) before going green, all thanks to the tenacity and vision of a single man. There is also Google, who has become leader in its sector, thanks to the perseverance of its founders ; SpaceX, SolarCity and Tesla, all three, are thriving businesses of the new media darling and worthy Steve Jobs replacement, Elon Musk. The other example that comes to mind is Facebook, whose founder was well advised, who today has become a real giant to such an extent that this company has become the F of GAFA.

And to finish, …. drum rolls … Apple ! Well, for this one, I have nothing to say because if you do not understand why I quote it here … it is that you not only missed an episode but a whole season. Catch up! 🙂