Startup and unicorn clarity cometh, just at the price of everything
It’s a nasty day for asset prices.
Around the world, the stock market is selling off. Here in the United States, shares are following suit in early-morning trading. Tech stocks are taking fresh blows, and sentiment among the investing classes has cooled from chilly to frozen as last year’s ebullience gets a long-awaited reality check.
To understand the scale of the pain, let’s use a few stocks as indicators. Coinbase, which saw its value skyrocket to as much as $368.90 per share after its direct listing, kicked off trading today for less than $100 per share. Zoom, whose value soared to $406.48 in the last year, is now worth around $93 per share.
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The value of software shares more generally is no better. The Bessemer Cloud Index is off more than 50% from all-time highs set last November. In far less than a year, then, we’ve seen the value of tech companies peak, and then crater. The fall from grace has been rapid, but not even, as startups managed to keep treading water for months longer than their public counterparts. That’s changing.
The world of blockchains and digital assets is also under fire from investors, selling off sharply in recent days.
Doom, gloom, and sadness all around? Yes, but not entirely.
The good news is that while prices are flatlining around the world for tech assets, we’re going to get a real shakeout in the coming quarters. It will be clarifying and will shine a light on a whole lotta claptrap. Call it joker detection. Let me explain.
From slowdown to shakeout
There’s no point in porcine cosmetics; we could be heading into a massive startup correction on the order of March 2020, but for a longer period of time, and with declines that wind up being larger in aggregate.
So what’s the upside? A decline in bullshit.
In a letter that Uber’s CEO sent to his staff over the weekend — CNBC has the scoop there — there was a lot worth chewing on, but one thing, in particular, stuck in my craw (emphasis TechCrunch):
In times of uncertainty, investors look for safety. They recognize that we are the scaled leader in our categories, but they don’t know how much that’s worth. Channeling Jerry Maguire, we need to show them the money. We have made a ton of progress in terms of profitability, setting a target for $5 billion in Adjusted EBITDA in 2024, but the goalposts have changed. Now it’s about free cash flow. We can (and should) get there fast.
Hot damn.
