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The trouble with tech unicorns

06/05/2019 10:00 by The Soluciones Holísticas Team

In its 20/04/2019 issue The Economist has published a the cover article "The trouble with tech unicorns" on the difficulties of the new tech star companies to find a path to high profits.

Millions of users, cool brands and charismatic bosses are not enough. They and their venture-capital (VC) backers are rushing to sell shares at high prices to mutual funds and pension schemes run for ordinary people. There is, however, a problem with the unicorns: their business models.

Their services are often deeply discounted in order to supercharge revenue growth. The justification for this is the Silicon Valley doctrine of “blitzscaling” in order to conquer “winner-takes-all” markets - or in plain English, conducting a high-speed land grab in the hope of finding gold.Tech entrepreneurs and their backers need to rethink what has become an unsustainable approach to building firms and commercialising ideas.

Although growing fast has become easier today thanks to cloud computing, smartphones and social media, the low interest rates decreased returns for investors.

The unicorns' markets are contested by other richly funded rivals and established firms, and their customers are not locked in to one single brand.

Todays unicorns have to face new legal dangers and gory regulatory risks in the form of digital taxes and data and content laws.

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