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Unicorns An Endangered Species
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00:00Sous-titrage Société Radio-Canada
00:30C'est parti !
01:00The tech world is fascinated by them, the rare startups that achieve billion dollar valuations,
01:07but as the economic climate changes and investors demand more profitability,
01:12do you think that unicorns will be able to grow and innovate at the same pace?
01:17That's what we're going to see right now.
01:19Ladies and gentlemen, please welcome Charlie Perrault and all of her guests.
01:48Hi everyone, thank you very much for being
01:51with us today to talk about this great topic, unicorns, is it an endangered species?
01:58And to talk about that, I have a great panel with me today.
02:02Jenny Fielding, your managing partner at Everywhere Ventures.
02:06J.P. Lee, your CEO and managing partner at SoftBank Ventures Asia.
02:13Ilya Strubulev, your professor of finance and private equity at Stanford Graduate School of Business.
02:19And Maya Noël, you are the CEO and managing director at France Digital,
02:24which is a non-profit organization gathering investors and entrepreneurs in the tech French ecosystem.
02:33Thank you again for being here.
02:36So we've all seen that, you know, there are less and less unicorns since, you know, a few months now.
02:45Just in April, there were like just five new ones in the world.
02:49So is it like bad news or good news?
02:54Jenny?
02:55Well, first of all, thanks for having me.
02:57Very excited to be here.
02:59You know, I think what we saw in 2020 and 2021 is really not sustainable, right?
03:05I think there was, you know, dozens of companies being minted unicorns every week.
03:10That's just not realistic and the fundamentals really weren't there.
03:14So the quick answer is I think the reset, although painful for everyone,
03:18including companies in our own portfolio, is actually a positive.
03:22I guess I could add a little bit to that.
03:24But yes, just like what Jenny said, what happened in 2020, 2021 was very not sustainable.
03:33And we've been telling our portfolio companies to manage their runways and, you know,
03:39do a better cash management because a lot of the growth stage investors are not as active as in 2020,
03:462021.
03:47So a lot of these companies who've been, you know, growing, you know, burning and growing are now having a
03:54hard time finding an investor
03:56who can deploy growth capital to keep on doing that.
04:00So I think it's important to, you know, find enough, you know, runways and, you know,
04:07pass the profitability to be able to raise another round, you know, if you're at a growth stage today.
04:16So my team at Stanford following every single American unicorn for a number of years.
04:22Both how they become unicorns and what happens to them.
04:26And yes, we do find that the valuations are lower than they were just a couple of years ago.
04:32On the other hand, we find that there are a lot of unicorns that became unicorns in 2014 to 2020
04:40are still not alive.
04:43But the success rate, the eventual success rate is pretty high.
04:47So in fact, the environment right now is, despite the low valuations, is on the positive side.
04:54So I would look not just at the valuations, which is whether they're still above 1 billion, but what is
05:01the eventual exit rate.
05:03For example, we find that about 87% of companies that became unicorns that are U.S.-based, venture capital-backed,
05:12are still going out either through successful IPO or through successful M&A.
05:18So in fact, the overall news is relatively positive rather than negative.
05:24Maya?
05:25It's difficult to say if it's a good or bad news.
05:28As you say, I mean, in 2021, something happened that never happened before.
05:33So I think that everyone on the back end went a bit crazy with some huge valuation,
05:38without sometimes thinking about the real size of the market.
05:41So it was very special.
05:42I think it's totally normal that some unicorns disappeared and that there are less and less unicorns right now
05:49because it's more difficult to raise money on the market.
05:52So, yeah, the valuations are lower.
05:54But I don't think it's a bad thing.
05:56It's just like things coming back to normal.
06:00Let me just add very quickly.
06:01Is that if you look back into the history,
06:04then most successful venture capital-backed companies were created when the valuations were lower.
06:10Either in 2001, 2000 to 2003, or in 2009, 2010, 2011.
06:16So in fact, right now, and I teach venture capital at Stanford,
06:20so most of my students do want to become venture capital-backed entrepreneurs.
06:24And I know that the valuations are substantially low right now,
06:29based on what they raised right after graduating.
06:32They're much more likely to be successful eventually,
06:34if we look at the history of the past 30 years.
06:37So from the investment point of view, if you happen to invest in 2020,
06:41that might not be the best return ever.
06:44If you're investing in 2023, perhaps in 2024,
06:48based on historical evidence, you're going to make a pretty good return.
06:53Yes, we're very worried about our fund from 2020 and 2021 vintage.
06:58And is Jennifer, is a unicorn born in 2021, or the beginning of 2022,
07:07is worth the same as a unicorn born in 2019 or today?
07:11Yeah, it's actually a great question.
07:14So in our fund one, which is a 2018 vintage, we have our first unicorn.
07:20And I've been kind of joking with everyone, no, no, it's a real unicorn,
07:24because they just raised at a billion-dollar valuation a few weeks ago.
07:28So I think that, you know, going back to what you said,
07:32like we're telling companies all of these things.
07:35They need to be focused on metrics.
07:36They need to really have kind of an, you know, more of an austerity mindset,
07:42be capital efficient.
07:43And I think those companies have a real shot, to your point.
07:46Great time.
07:47If you're becoming a unicorn now in this hard environment, you know,
07:51that's really great.
07:52I think the other thing that is, we can't forget,
07:55is there's still a ton of money on the sidelines.
07:58I was at a conference called Super Returns last week in Berlin,
08:02and I was on a panel with one of the top fund of fund managers,
08:07and his, you know, his point was that times are, you know,
08:11are quite different right now,
08:13but if you can kind of break through the noise, as you said,
08:17this is an incredible time to, you know, to be a founder.
08:21Let me just add very quickly,
08:23is that there are unicorns, and there are unicorns to your point.
08:28So for each unicorn, for each company that we look at,
08:31with my team at Stanford, we collect about 200 variables,
08:36because we're trying to predict success of those companies.
08:40And if you're interested, you can go on my LinkedIn page,
08:43and you can see a lot of variables that we're investigating.
08:46And what we see is that it's not only about the time when you become a unicorn.
08:50So, for example, if you become a unicorn right now,
08:53you're much more likely to be successful, okay?
08:55But also based on the demographic characteristics of the founders.
08:59So I think, I'm sure that all the VCs here will agree,
09:03that the features of the founders are critically important.
09:07And so if you combine the demographic, educational characteristics of the founders,
09:12together with the time,
09:13also together with the who backing those unicorns,
09:17who are the investors,
09:18then in fact, you will be able to predict with a very high success rate,
09:22which companies are the real, as you say, real unicorns,
09:26as opposed to just unicorns.
09:29That's right.
09:29I mean, if I recall, in 2021,
09:33our team never really had time to do a proper due diligence, to be honest.
09:37It was either founders come to us and say,
09:40take it or leave it,
09:41because we have other investors in line
09:43who want to give us a billion-dollar valuation.
09:45So a lot of the VCs,
09:47I'm sure some of you guys will agree with me,
09:50that we just had to come to a decision
09:52because of a fear of missing out.
09:55And that was critical.
09:57But now, finally, we can do a proper due diligence.
10:00There's no such thing as a take it or leave it situation.
10:05We're now able to look at the numbers, the metrics,
10:08and come up with the proper valuation.
10:11So in terms of what you just said,
10:14the unicorns that we identify at a time like this,
10:17I would say, would be a much healthier company
10:20with a huge possibility or a bigger possibility to succeed.
10:23I mean, but the question is, did you have to invest?
10:27So that's a good question.
10:28I mean, I think that's what everyone wants to know.
10:30Like, SoftBank obviously has been, you know,
10:33one of the folks that potentially created some of,
10:36you know, the momentum, shall we call it,
10:39in 2020, 2021.
10:41And so, you know, was it necessary
10:43or could you have sat on the sidelines?
10:45Maybe just an existential question.
10:46Yeah, yeah, yeah.
10:47I mean, just to clarify,
10:49I mean, I run the ventures.
10:51I mean, my colleagues in the vision funds
10:52were the ones who did the bigger checks.
10:56But to answer your question,
11:00looking back, yes, I think we did make some decisions
11:05because of, you know, the FOMO, right?
11:08And are we going to make the same decision?
11:11It's a really difficult question
11:12because we have a fund
11:14and we have an investment period
11:15that we have to deploy to capital.
11:17So, just like what Inia said,
11:20the vintage matters a lot in our business.
11:23Well, I mean, I would just add on the panel
11:25I was at at SuperTurns,
11:26the fund-to-fund manager said
11:28that he predicted that many of the growth funds
11:30will actually be giving money back.
11:32And I think we've seen it,
11:33at least in the U.S.,
11:35larger funds have been scaling back.
11:38So, whether you call that giving back
11:40or not being able to raise,
11:42it's pretty interesting.
11:43There was an article yesterday
11:44that Insight Venture Partners,
11:46I guess the largest growth investor,
11:49they have about $90 billion under management.
11:51They're going out for a $20 billion fund
11:55and they've closed $2 billion of that.
11:57So, still a lot of money for me
11:59and my tiny little fund.
12:01But, you know, from $2 to $20 is quite a leap.
12:04So, we'll see.
12:05Yeah, exactly.
12:07Maya, do you want to add something?
12:10So, no, I'm talking from the entrepreneur's point of view
12:13because today, when you raise a lot of money
12:16and then you have no exit possibility today,
12:19it's quite difficult.
12:21So, when I was preparing this panel,
12:22I was wondering what is exactly a unicorn?
12:25Is it only a valuation,
12:27meaning you're worthing $1 billion
12:30or is it something else?
12:32And when I checked the definition,
12:34I've seen that it also means something that you desire,
12:37but it's difficult to reach.
12:39Which means, actually,
12:41and I mean, especially in France,
12:42because, you know, we had, like,
12:44the president called to have 25 unicorns by 2025.
12:48So, it became like a common dream to achieve this goal.
12:52So, I think, from that point of view,
12:54it was interesting to have this common dream.
12:56but it was only making the focus on the valuation,
13:00which is, I think, sometimes a bit bad
13:02for the company and the entrepreneurs
13:04because this is not the most important thing
13:06and I think that there are a lot of, I mean,
13:09components in the success,
13:11more than the variation.
13:12Let me just comment very quickly
13:14about the goal of 25 unicorns by 25.
13:18It's a great goal.
13:19So, several years ago,
13:21we did an analysis at Stanford
13:24about the economic impact of venture capital.
13:27So, we looked at the last 50 years.
13:31We looked at every single company
13:32that went public in the United States.
13:35We found out that about a third
13:36of all largest U.S. companies
13:39that are public venture capital-backed.
13:43If you look today at top 10 companies,
13:45then 7 out of 10
13:46used to be venture capital-backed.
13:49We then compared it
13:50with all other developed countries
13:53and France stood out.
13:56Out of 50 largest companies in France
14:00that were created in the last 50 years,
14:07zero, zero were venture capital-backed.
14:09In fact, France did not have a single company
14:11that was created in the last 45 or 50 years.
14:15So, this is a great goal,
14:16but I think without creating
14:18the persimonious venture ecosystem
14:22with exit opportunities
14:24and funding across all the spectrum,
14:27I don't think it will be possible
14:29to achieve that goal.
14:31I think we are getting to that point,
14:33but it's very true what you say
14:34because if we look back like 10 years ago,
14:37venture capital was meaning
14:38nothing for anyone in France.
14:40Like, what does it mean
14:41raising some money?
14:42And today, in the titles of the papers,
14:45you can see, hey,
14:46this company raised billions,
14:48which is amazing
14:49because people talk about it,
14:51but sometimes they talk about it
14:52without knowing what it means.
14:53And this is why it's interesting
14:56to have this common dream,
14:58saying, okay, we have to raise money,
14:59and it's important to have
15:01some venture capital here in France.
15:03But for what?
15:04And sometimes I think we need to explain
15:06why we need that.
15:08And you mentioned a little bit
15:10about it earlier,
15:12but of course,
15:13this status can be a dream
15:16for some entrepreneurs,
15:17for investors,
15:18but is it also,
15:20there's a link with the,
15:21maybe,
15:21why is it so important
15:23for political,
15:24maybe, point of view,
15:25for you as,
15:27you're kind of a lobbyist,
15:28we're going to say that,
15:29but in a good way,
15:31is it important for you
15:32to have this unicorn,
15:34you know,
15:35to promote the ecosystem?
15:38We used to need that,
15:39I think,
15:40because as I said,
15:42people didn't understand
15:43the job of venture capital
15:45in France,
15:46and we still don't need
15:48enough money
15:48if we want really to grow
15:50up to that stage,
15:51the late stage.
15:52So we need to keep on fighting
15:54to make people understand
15:55that we need more funds,
15:56if we really want,
15:57we need to take some risk
15:58if we really want to innovate.
16:00So, yeah,
16:02we still need to have
16:03this conversation,
16:05this sign of encouragement
16:07from the government
16:08that they are able,
16:09willing to bet with us
16:11on innovation.
16:13Well,
16:13to bet on innovation,
16:15you need to understand
16:16the venture ecosystem.
16:17And my concern
16:18is that if the government
16:19says that we would like
16:20to have 25 unicorns soon,
16:23they don't really understand
16:24the venture ecosystem,
16:25because it's very easy
16:27to become a unicorn.
16:28You know,
16:28in my venture capital class
16:30at Stanford,
16:31one of the cases
16:32that students do
16:33is that I give them
16:34a fictitious company
16:36with a fair value
16:38of $50 million,
16:40and they have to create
16:41a unicorn out of this company.
16:43And it's very easy to do.
16:45If you know,
16:47as all the panelists
16:48presumably do,
16:49how you can create
16:50various specific investor rights
16:52and investor terms,
16:53so that you artificially
16:55increase the post-money valuation.
16:57So I work a lot
16:58with regulators,
16:59and I find out
16:59that very often regulators,
17:01policy makers,
17:02don't really understand
17:03what valuation means
17:04in the context
17:05of the venture capital.
17:06So journalists,
17:07for example,
17:08I recently talked
17:09to a Wall Street journalist.
17:11They also don't understand
17:12that there is a difference
17:13between market capitalization
17:14or fair value
17:15and post-money valuation.
17:18So when we looked
17:20at the entire venture capital
17:23backed companies
17:24in the United States,
17:24we find out
17:25that the post-money valuation
17:30overvalues
17:30by around 50%,
17:33which means that
17:34if you take
17:35an average unicorn
17:37and deflate it by 50%,
17:39it will stop being unicorn.
17:40And so I'm a little bit
17:41concerned about the goal
17:42to find unicorns.
17:46They will be found.
17:47That doesn't mean
17:47that the ecosystem
17:48will be successful.
17:49This is why I think
17:50the focus shouldn't be,
17:51shouldn't remain
17:52unicorn-only.
17:53It was, I think,
17:54something like back
17:55in 2019,
17:56just to make the focus
17:57about what is
17:59the venture capital.
18:00And then this is why
18:02I think the topic today
18:02is, is it an under the spaces?
18:04I think, yes.
18:05I think we need
18:05to change the dream
18:06and change the,
18:07you know,
18:08what we are reaching,
18:09what we are trying to reach.
18:11I mean,
18:11I would just chime in.
18:13I mean,
18:13I have a crazy story
18:14where I was the first investor.
18:16So I do all pre-seed investing,
18:17first check-in.
18:18and I was the first investor
18:20into a company
18:21that went public
18:22and I did not make any money.
18:26So just think about that
18:27for a minute.
18:28Like,
18:28I invested in the company
18:29at about a 6 million valuation.
18:30It went public
18:31at a billion
18:32and because of
18:34financial engineering,
18:35cram downs,
18:37like, you know,
18:37all these types of things,
18:39when it went public,
18:42I actually basically
18:43got my money back, right?
18:44So I think to your point,
18:45both of your points,
18:46I don't think we can just say
18:47we need unicorns.
18:49That's not enough.
18:50We need, like,
18:51fundamental good economics.
18:53We need people,
18:54you know,
18:55trying to change the world
18:56and do good things
18:57and then also understand
18:59all the stakeholders,
18:59which, you know,
19:01are your investors,
19:02are your customers,
19:03all these other people.
19:04I can add one thing to that.
19:05So, you know,
19:08a lot of the VCs,
19:10you know,
19:10say our fund performance
19:12is like this much.
19:13We have these many unicorns.
19:15But, you know,
19:16to be honest,
19:17a lot of these performance
19:18that they claim,
19:19including us,
19:20are unrealized value.
19:22But what I've been noticing
19:24recently is
19:25there's actually
19:25a significant gap
19:26between the realized value
19:29of the fund
19:30and unrealized value
19:32that's on the book.
19:34So, especially at a time like this,
19:36it's really hard
19:37to liquidate these assets.
19:39You might have, like,
19:40five unicorns sitting on,
19:41you know,
19:41on your book.
19:42But if you actually go out there,
19:44try to liquidate your shares,
19:46it's so hard to find a buyer.
19:48But your LPs believe
19:50your fund is now
19:51at 5x, 6x.
19:52But say you want to liquidate
19:54the fund tomorrow.
19:55Can you actually realize that?
19:57Right?
19:57I think because what happened
19:59in the past two, three years,
20:01the gap between the reality
20:03and what it says in the book,
20:05I think I'm talking about all VCs,
20:07is pretty wide.
20:08And I think that's something
20:09that I wanted to point out today
20:11related to this unicorn discussion.
20:13Well, you're absolutely right.
20:15First of all,
20:15you know,
20:16we surveyed 1,000 venture capitalists.
20:19And 95% of them said,
20:22where are our fund is
20:24in top quartile?
20:26Well, mathematically,
20:27it's impossible, okay?
20:28Second is that
20:30you're absolutely right
20:31about the book values
20:34that are stale,
20:36that are unrealized,
20:38and they cannot change for years.
20:40Now, it's even worse than that,
20:42I think.
20:43Because if you think about,
20:44let's say you have
20:45two companies in your portfolio,
20:47and let's say one company
20:48is very successful,
20:49then it is likely
20:51to raise another round.
20:53Now, let's say
20:54the second company
20:55is unsuccessful.
20:56Well, it used to be a unicorn,
20:57so you booked it
20:59in your portfolio
21:00at 1 billion plus.
21:02But now it is unsuccessful,
21:04but not just debt yet.
21:06I call it the zombie company
21:08or the living debt.
21:09And I'm sure that all of you
21:10have companies like that, okay?
21:12Now, this company
21:13is less likely to raise money.
21:15Therefore,
21:17it's much more likely
21:19to stay at a high valuation
21:22in your portfolio.
21:23So this is called
21:25a survivorship bias.
21:26And because of the survivorship bias,
21:28many venture capital funds
21:31that seem to be performing well,
21:35in fact,
21:35are performing pretty poor.
21:37And I'm explaining this a lot
21:38when I meet a lot of large LPs.
21:40They show me
21:41their unrealized IRR.
21:43And when you,
21:45on top of everything else,
21:46add the survivorship bias
21:47that typically reduces IRR,
21:49at least halves IRR.
21:51And at this point,
21:55you might reduce your IRR
21:56by three times.
21:57Yes.
21:57So that's an interesting point,
21:58but aren't they being told
22:00by their LPs
22:01to mark them down?
22:03Well, that depends on the LPs.
22:05That depends on the VC.
22:06So in the VC,
22:07at least in the United States,
22:08the typical
22:124-9-A strategy
22:14is effective
22:15to book it
22:16at either the original cost
22:17or more likely
22:18at the cost
22:19of the most recent round.
22:20So let's say the company
22:21raised four rounds,
22:22A, B, C, D,
22:23and the D round,
22:25the post money value
22:26would have been
22:26whatever it is,
22:27the share price.
22:28And then,
22:29if the company,
22:30and then that is going
22:31to be the book value
22:32that you're going
22:32to report to your LPs.
22:34That's surprising to me
22:35because most of the discussion
22:36in the LP circles
22:37is around marking those down
22:39and, I mean,
22:40for accounting purposes
22:41if nothing else.
22:42So, yeah,
22:44I think most,
22:45if you have institutional LPs,
22:47you're being guided
22:48to something slightly different.
22:50Well, VCs do not like markdown,
22:52especially when you're
22:53about to raise funds.
22:55And as it's more difficult
22:57to raise funding right now,
22:58it's also less incentives
23:00to markdown.
23:01So, in fact,
23:02if I look at the past 18 months,
23:04I see lower markdowns
23:06compared to the previous 10 years.
23:09It's likely related
23:11to the fact
23:12that it's much more difficult.
23:13It takes longer
23:14to raise money.
23:15Just one thing
23:16to add to that
23:17is a lot of our institution
23:18and LPs
23:19started asking for DPI.
23:22So, now they want to know
23:24how much did you actually sell,
23:28right?
23:28How much did you actually
23:29cash them out, right?
23:31And turned into a real value.
23:32So, that's something
23:34that I've been noticing recently.
23:36How are you guys
23:37thinking about markdowns?
23:39Just, you know,
23:40before the fact, right?
23:41Before you actually have to.
23:43So, I think that really
23:44depending on
23:45what kind of standard
23:46you set, right?
23:47I mean, you can't
23:48just mark it down.
23:49I mean, you have to put
23:51a proper guideline to it.
23:53And we're actually,
23:54you know, talking
23:55to multiple LPs
23:56and to find out
23:58with what metrics
23:59they would feel comfortable
24:00about the performance
24:02of the fund.
24:04And just like
24:05what you said,
24:07they're not just unicorns
24:08but baby unicorns
24:09that are, you know,
24:11still marked as, you know,
24:12$500, $600 million
24:13in valuation.
24:14But, in fact,
24:15they're zombies, right?
24:17How are they going
24:18to identify them?
24:19How are they going
24:19to disclose it
24:20to the LPs?
24:21It's just,
24:22there hasn't been
24:23a proper guideline to it.
24:24so, we're hoping
24:26to find something,
24:27you know,
24:27or define it together.
24:29I'm surprised.
24:30We've marked down
24:31companies in our portfolio
24:32anticipating that
24:34that will happen.
24:35I think that's
24:35the best practice.
24:36Did you mark down
24:36because this company
24:38is liquidated,
24:40sold,
24:40or they're still
24:41very much alive?
24:42No, they're alive
24:43but we don't think
24:44that they're going to,
24:45you know,
24:45maybe they've raised
24:45a safer note
24:46so not a price round
24:48over that
24:48at a lower valuation.
24:52So,
24:52if you mark down
24:53how do you decide
24:54to mark down?
24:55By how much
24:55to mark down?
24:56Well, I mean,
24:57that's a longer discussion
24:58but we have guidelines
25:00for doing that.
25:01So, either on
25:02the new down round price
25:04or on an agreed upon,
25:06you know,
25:07with our auditors.
25:08And it leads
25:09to my other question
25:10because do we have
25:12other indicators now
25:13because before
25:14it was like variation,
25:16the big indicators.
25:17So, are there
25:19any other indicators
25:20for, you know,
25:21to say that
25:22a startup
25:23is a success?
25:25This is actually
25:25something that I want
25:26to say
25:26because it's funny
25:27because when I hear you,
25:28it's a conversation
25:29between VC
25:30and sometimes
25:30we tend to forget
25:31the company behind
25:33and all the people behind.
25:34So, I mean,
25:35the first role
25:37of the VC
25:37is to give some money
25:39to people
25:40who don't
25:41earn some money yet
25:42but who have an idea,
25:44who want to build something
25:45and I think
25:47that we really need
25:48to realign
25:48the key of success
25:49of the company
25:50before the valuation
25:51because definitely
25:52this is your job
25:53but, I mean,
25:55it's very frustrating
25:56and I know
25:56because I heard
25:57a lot of entrepreneurs
25:58saying, okay,
25:59sometimes they have
26:00good relationship
26:00with VC.
26:01Most of them
26:01have some good relationship
26:03and in our association
26:04they are talking
26:05together a lot
26:06and I think
26:06they are aligned
26:07but some of them
26:09are also very frustrating
26:10because we talk a lot
26:11about the variation
26:11but not about
26:13like the new clients,
26:15how do they buy clients.
26:17also we really want
26:19to raise some funds
26:20to make some great impact
26:21on the planets
26:22and on the human
26:23because we have
26:23a real innovation behind
26:25and it's funny
26:27because we are talking
26:28about the unicorns
26:29and I think that
26:30the bad side of it
26:32is really the fact
26:32that we just focus
26:33on the valuation.
26:34So I think I can add
26:36one thing to that.
26:37So if I recall
26:38the last couple of years
26:39some of the key metrics
26:41for valuation
26:41was GMV or ARR
26:45so to be honest
26:48I don't even know
26:49what definition of GMV is.
26:51You know,
26:52I think the definition
26:53of GMV or ARR
26:55has been all different
26:56among investors
26:57and the founders
26:59and also I think
27:00I feel some responsibility
27:02to this.
27:02We've been encouraging
27:03founders to
27:04to create the graph
27:06external growth
27:07and never really
27:09digged into the path
27:10of profitability
27:11or the fundamental
27:12of the business
27:14and I think now
27:15we're all realizing
27:16that we should give
27:18a proper guideline
27:20or KPIs
27:22to the founders
27:23who want to
27:25raise the next round
27:26of business, right?
27:27So I think I'm sure
27:30a lot of the VCs
27:31now no longer look
27:32at GMV
27:33and do a multiple
27:33to come up
27:34with a valuation
27:35anymore, right?
27:36And that's actually
27:36a lot of unicorns
27:37came out
27:38based on that metrics
27:39in the past couple of years
27:40which is no longer
27:41I think valid.
27:43Well, there's a basic trade-off
27:45between profitability
27:45and growth.
27:47So several years ago
27:48when interest rates
27:49were very low
27:49everybody wanted to show growth
27:51because that increased
27:53the valuation
27:54or the perceived valuation
27:55and now as interest rates
27:57as the cost of capital
27:58went up
27:59suddenly profitability
28:00is becoming much more important.
28:02Now, however,
28:03if you're an early stage startup
28:05it's still mostly about growth.
28:08You know,
28:09when your investors
28:09try to push you
28:10towards showing profitability
28:11very early
28:12for example
28:12to avoid
28:13a markdown,
28:15a down round
28:16that means that in fact
28:17the chance of you
28:18becoming a real unicorn
28:20are lower
28:21because for an early stage company
28:23with some very few exceptions
28:25there is a fundamental trade-off.
28:28Either you try to scale up
28:29pretty quickly
28:30or you try to become
28:32a profitable company
28:33and then you scale up much less.
28:35I mean,
28:36I would only just say
28:37the nuance there
28:38is like
28:38we're investing in early stage
28:40and what we've been saying
28:41to our founders
28:41imagine a world
28:43where this is the last money
28:44that you get.
28:45So we're not saying it is
28:46and we're not saying
28:47we want the world
28:48to be that way
28:49but imagine this is the last money
28:51what do you think
28:52you can do with it?
28:53And I think it's more
28:53of a mental exercise
28:54so I think we agree
28:56you need capital for growth.
28:57I mean,
28:57I think we don't want companies
28:59that are going for profitability
29:00early on
29:01but we want companies
29:02that understand
29:03their financial model
29:04unit economics
29:05what healthy business can be
29:07so that if they need
29:09to get there
29:09because, you know,
29:10the world
29:11we have another black swan
29:13and they need to sustain
29:14their business
29:15that there is a path.
29:16Well, let me try
29:17to be provocative
29:17and disagree.
29:19So it is true
29:20that when we're
29:22in the crisis situation
29:23companies are
29:24on average
29:24much less likely
29:25to raise money.
29:26So for most companies
29:28thinking that
29:28this is the last money
29:30you can raise
29:31is a good idea
29:32but not for the most
29:33successful companies
29:35because the most successful
29:36companies always will be
29:38to raise money.
29:39Think about SpaceX.
29:40so SpaceX raised
29:42its outside round
29:44in September 2008
29:47during the most severe
29:49financial crisis
29:49of the 20th century
29:5021st century
29:52and yet Elon Musk
29:55raised money
29:55so if you look at
29:56most successful companies
29:57they were able
29:59to raise money.
30:00I call it the specific
30:01name for it
30:02for this principle
30:03it's called
30:04the best
30:04and the rest
30:06so the rest
30:07will not be able
30:08to raise
30:08the best
30:09always will be able
30:10to raise
30:11so by telling
30:11all your entrepreneurs
30:12not to raise
30:14you're really also saying
30:15for the best
30:16not to raise
30:17that I think
30:18reduces the probability
30:19that your potentially best
30:21will be the best
30:23because they need
30:24to grow very fast
30:25they don't need to save
30:27they need to be able
30:28to scale up.
30:29I mean I think we agree
30:30I've invested
30:31I've been the first check
30:32into five unicorns
30:33you know I've seen this
30:36but we're saying
30:37do that
30:38have that mindset
30:39you know
30:40the sky's the limit
30:41but if something crazy happens
30:43know your business
30:44and know the fundamentals
30:45so slightly different
30:46and when I look
30:47at the companies
30:48I have a company
30:48in my portfolio
30:49that's raised
30:50at an 8 billion valuation
30:51when I look
30:52at that founder
30:53very experienced founder
30:54knows his business
30:55inside and out
30:56and not a lot
30:57of the kind of
30:59loose math
30:59what's GMV
31:00I mean this founder
31:02is very focused
31:03on you know
31:04building a sustainable business
31:05so I think we agree
31:07but you know
31:08slightly different framing
31:10but there are
31:10there are also companies
31:11that it's really hard
31:12to see that
31:13you know to be honest
31:15say you ran into
31:16a company like Google
31:17in the early days
31:18they're growing
31:20like crazy
31:21and burning money
31:22like crazy
31:22at the same time
31:23as a VC
31:24and you can't really see
31:26the path of profitability yet
31:28or are you going
31:29to be able to invest
31:29right
31:31I was able to
31:32invite Sam Altman
31:33from OpenAI
31:34to Korea last Friday
31:35and we had a great
31:36fireside chat
31:37and I read an article
31:38about OpenAI
31:39saying they're burning
31:40about a million dollar
31:42a day
31:42and if you had an opportunity
31:44to invest in them
31:45would you invest
31:46right
31:47I mean
31:47assuming that you have
31:48a strong belief
31:49that they will be
31:50the leader
31:50in the generative AI
31:51so I think
31:53as a VC
31:55I think there's
31:56a certain area
31:58of I would say
32:01uncertainty
32:02that you'll have
32:02to just embrace
32:03at the same time
32:07I'm surprised
32:08if OpenAI
32:09burns just
32:10one million dollars
32:11a day
32:11I'll be very concerned
32:12about the future
32:13of OpenAI
32:14I think they should
32:15be burning at least
32:1620 million dollars
32:17a day
32:20I guess
32:21I'm sure
32:22talk to Sam about that
32:23yeah yeah yeah
32:23I'm sure
32:24they want to burn more
32:27yeah
32:27you want
32:28no I think it's funny
32:29because it's true
32:30that the balance
32:31is very difficult
32:32between taking some risk
32:33and then having
32:34someone responsible
32:36knowing the
32:37fundamental of the business
32:38but we
32:39yeah
32:40we must remember
32:40that the role
32:41of the VC
32:42is taking some risk
32:43with the company
32:45so you think
32:46at the unicorn
32:47status is going
32:48to remain
32:49like the big
32:50indicator
32:51are you seeing
32:52another animal
32:54another beast
32:55coming up
32:58so I think
32:59you know
32:59just like what
33:00everyone said
33:02good companies
33:03will keep on
33:03coming out
33:04right
33:04I mean
33:05just like what
33:06Jenny said
33:07I mean
33:07there are companies
33:08who are
33:09you know
33:10building
33:10you know
33:11creating profits
33:11you know
33:12making a sustainable
33:13growth
33:14and
33:15I think
33:15the definition
33:17of unicorn
33:17will just
33:18evolve
33:20and I think
33:21it's evolving
33:22at the moment
33:24I absolutely
33:25agree
33:25I just think
33:26that
33:27as I look
33:28at many
33:28young companies
33:29in Silicon Valley
33:30for example
33:31I think
33:32that the
33:33most exciting
33:34companies
33:35have not
33:35yet been born
33:36or just
33:38about
33:38being born
33:39right now
33:40so in fact
33:41I'm going to
33:41predict
33:42and that
33:43is going
33:43back to
33:43our conversation
33:44about comparing
33:45France and
33:45the United States
33:46so I'm going
33:47to make a claim
33:47that
33:48if you look
33:4910 years
33:49down the road
33:50so you can
33:51write it down
33:51and get back
33:52to me
33:52in 2033
33:54then
33:55if you look
33:56at the largest
33:58100 companies
33:59in America
33:5910 years
34:00down the road
34:01my prediction
34:02is that
34:02at least
34:0315 of them
34:04do not yet
34:05exist
34:06think about this
34:07and that
34:08is I think
34:09the right
34:09goal
34:09for your
34:10president
34:11which is
34:11to make
34:12sure that
34:12by 2033
34:14at least
34:15two companies
34:16out of
34:17largest
34:17French
34:1750 companies
34:19have just
34:20just born
34:21maybe
34:21going to be
34:22born in the
34:22next couple
34:22of years
34:23I think
34:23that is
34:23the right
34:24goal
34:25faster house
34:26than unicorn
34:27something that
34:28doesn't have
34:28doesn't exist
34:29yet but
34:29will be able
34:30to build
34:31quickly
34:32something bigger
34:33yeah okay
34:34that's a great
34:35goal
34:35and have a large
34:36impact on the
34:36economy
34:38not just on
34:38the valuation
34:43I mean I'm
34:45interested in
34:46you know
34:46founders that
34:48are building
34:48impactful companies
34:49and I feel like
34:50that's what we
34:50should be
34:51focused on
34:52we invest
34:53in healthcare
34:53we invest
34:54in you know
34:55future of work
34:56areas where
34:57we're really
34:57excited to make
34:58an impact
34:59you know
34:59in the world
35:00and I think
35:01if that's your
35:02goal as a
35:02founder
35:03rather than
35:03you know
35:04having some
35:06milestone
35:07as a
35:07unicorn
35:08whatever that
35:09means
35:09that's a good
35:10place for
35:11founders to be
35:11I completely
35:13agree and also
35:13basically
35:14back to what
35:15you've said
35:16valuation is
35:17important
35:17but in fact
35:18the underlying
35:20business model
35:20and the
35:21founding team
35:21are much more
35:22important than
35:23specific number
35:24and when you
35:25look at the
35:26prediction of
35:26success
35:27then the
35:28valuation
35:29doesn't play
35:29the most
35:30important role
35:31it is the
35:32founding team
35:33typically
35:34you mentioned
35:36the experience
35:36so the experience
35:37the education
35:39the professional
35:40experience
35:41that really play
35:41much more
35:42important role
35:43for example
35:44we find out
35:45not surprisingly
35:46that serial
35:47founders are
35:48much more
35:48likely to be
35:49successful
35:50but it's those
35:51serial founders
35:52that experienced
35:53failure in the
35:53past
35:54so if you
35:55look at all
35:55the founders
35:56of venture
35:56capital
35:57by companies
35:57that already
35:58started companies
35:59in the past
36:01before the
36:02current one
36:02and if they
36:03failed
36:05then they are
36:06much more
36:07likely to build
36:07a unicorn
36:08and much more
36:09likely to be
36:09eventually
36:09successful
36:11so we should
36:12go beyond
36:13valuation
36:13and we should
36:14look at
36:15a lot of
36:16other factors
36:17that contribute
36:18to making
36:20companies much
36:20more successful
36:22and within
36:23those factors
36:23I think
36:24that you're
36:25going to have
36:25to take
36:26into consideration
36:26some metrics
36:27about environments
36:28also
36:29and I think
36:30that you cannot
36:30build a great
36:31success if you
36:32don't have this
36:32consideration in
36:33your strategy
36:34so that's
36:35the first point
36:39and basically
36:40maybe this is
36:40the most important
36:41thing actually
36:41because why do
36:42you create
36:43some innovation
36:44if it's not
36:44for the planet
36:45I mean
36:47I also think
36:48it's a little bit
36:49more of a flywheel
36:50than we're saying
36:51it's not just
36:52about one thing
36:53so one of the
36:54companies that
36:54I've invested
36:55in that is a
36:56unicorn
36:56they're incredible
36:57at hiring
36:58because they've
36:59created this
36:59amazing culture
37:00and people love
37:01working at this
37:02company
37:02it's a fintech
37:03company
37:03they win every
37:04award of culture
37:06and that attracts
37:07incredible talent
37:07well when you
37:08attract incredible
37:09talent
37:09those people
37:10work really hard
37:11and you know
37:11it's kind of
37:12self-perpetuating
37:13so I'd like to be
37:14you know
37:14the metrics
37:15impact
37:16job creation
37:17culture
37:18happiness
37:19all these types
37:20of things
37:20I think
37:21are part
37:21of creating
37:22this unicorn
37:25and just a
37:26quick question
37:27from someone
37:28in the audience
37:29because it's
37:30kind of funny
37:30he said
37:31it would be
37:32interesting to hear
37:33your view
37:33on the Gorya's
37:34unicorn story
37:35can it ever
37:36be reasonable
37:37to consider
37:38a 9 month
37:39old company
37:40a unicorn
37:42who wants
37:43to get that
37:45you didn't hear
37:46yeah
37:47I'm going to
37:48can it ever
37:49be reasonable
37:49to consider
37:51a 9 month
37:51old company
37:53a unicorn
37:55absolutely
37:55so I think
37:56if I understood
37:57the question
37:57correctly
37:57whether a company
37:58that is very young
37:59can become a unicorn
38:00absolutely
38:01so unicorn
38:02is not about
38:03the age
38:03again if you go
38:03to my LinkedIn
38:04you'll see a lot
38:05of posts about
38:06at least about
38:07everything
38:08we cover
38:09every single
38:09American unicorn
38:10one of the posts
38:11is going to be
38:11about the distribution
38:12of age
38:13at which
38:14companies become
38:15unicorn
38:15and there's
38:17about 8%
38:18of companies
38:19in America
38:20are revenge
38:21capital
38:21companies
38:22that become
38:23unicorn
38:25prior to them
38:26reaching 2 years
38:27of age
38:28so I'm sure
38:28that some of them
38:29are going to be
38:309 months
38:30so it's not funny
38:32it's a reality
38:32but the question
38:33is do they
38:33stay unicorns
38:34so that's
38:35a very good question
38:36so when we look
38:36at the success rate
38:37then the age
38:39does play a role
38:40but in the opposite
38:41way
38:41which is
38:42if it took you
38:4215 years
38:43to become a unicorn
38:44you are much less
38:45likely eventually
38:46to become successful
38:48well thank you
38:49very much
38:50for taking the time
38:51to be here
38:52and see you
38:53thank you
38:54thank you
38:54thank you
38:57thank you
38:58thank you
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