Unicorns Are Crashing, Unibons Are Rising. What The Hell Is Happening In The Startup and VC Space?

Something very interesting and unusual is happening in the Tech startup and investment space. You have so many (60+ already since 2015) Unicorns whose valuations are coming down hard that CB Insights has dedicated a page called “Downround Tracker”. The real number is more than what is reported by CB Insights - as some Unicorns have done debt rounds, which would have been downrounds, if it were an equity financing round.

Most of the recognized names of the Tech startup world (Box, Etsy, Fitbit), that went public in the last few years are trading below their offering (IPO) price, well, except Facebook.  Everyone is talking about the dreaded “b” word “bubble", openly. Articles and blogs are written almost on a daily basis on “how the startup world is crashing” or as-if it is the end of the startup world.  You can’t even avoid seeing it by closing your eyes.

While at the same time, VC’s are raising record amounts of capital for their next funds. There are more billion $$ funds (I just made up a name — Unibon-funds with more than $1 billion) now than ever before.  So naturally people are confused. Should not the VC’s be closing shops rather? Since I post primarily about startups and investment on my Facebook page, I have been asked this a lot recently. What the hell is going on and what lies ahead? This is my quick thought. I am no writer, so give me some slack.

Some dates first. Steve Jobs announced the iPhone on June 29, 2007, and the Apple App store opened in July 2008. Then came the housing market crash that started on October 6, 2008. The second wave of tech startup scene picked up steam sometime after that, say in early 2009.

Geeks all over jumped into this new found opportunity- love affair with “smartphone”, as the new cool consumer gadget. Over the last seven years, we have witnessed the first wave of mobile/on-demand technology innovation “the Apps”. Today there are more than 1.6 million Android Apps and more than 1.5 million Apple iPhone Apps. This was easy stuff.  Now we are moving into serious stuff.

In the meanwhile, Facebook has become yuugee :-), been able to connect the world (more than 1.6 billion users).  News of any innovation that is happening in Silicon Valley is transmitted in real-time to far places in Africa and Asia. There is a social, cultural and technological change happening at a pace never seen before. With the advancement in sensors, robotics, data analytics, artificial intelligence, and deep learning, we are entering a new era of innovation and integration.

In the coming decade, our lives will not only be integrated with the lives of people across the globe but also with phone/the internet/IoT/home/car/drones/3D printing, anything and everything you can imagine.

According to Gartner 21 billion (with a big “B”), IoT devices will be connected by 2020. Cisco projects that the economic value created by IoT would be around $19 trillion (with a “T”) by 2020. These numbers are just mind blowing.

The spread of accelerators and incubators are helping create record numbers of founders across the globe, who are willing to take on the risk and try new things. Failure as a startup founder is a badge of honor now.

Some founder somewhere with a crazy idea will make it a reality.

So what lies ahead? It will be crazy- beyond anyone’s imagination. I mean in terms of innovation. Not necessarily they will be all for good. Its implications will be only known years later but the innovation juggernaut will continue at a far greater rate than we have seen ever before. Trillions of dollars of wealth, unprecedented in the history of mankind will be created in the coming decade.

There is a story in today’s New York Times – how a chip implanted in brain helped a paralyzed man regain control of his hand. Not in distance future, we will wear one or more, tiny health-tech devices or have a chip implanted in our body that will send a signal to the EMT before we know of our own impending health crisis. Doctors would have had all our medical records before we arrive. The ER will be ready for us by the time the ambulance drops us at the door. A matching donor heart could be found and flown in or an artificial heart could replace a heart before it is about to fail. If during sleep at home alone, someone gets a heart attack, the implant/device will send a signal to the EMT and get the emergency responder and may even automatically unlock the door from inside for them to enter.

A robot can give you a great massage, the kind of message you like, saving a trip to the massage therapist and help you do your chores and even play video games with you in a two-player game.

In the next decade, we will have personalized medicine ordered, made by 3D printers and ready to be picked up by the time we arrive at the Pharmacy. Doctors would be operating on a patient from 5,000 miles away using robots. Most of the common illness would be diagnosed by simply using an at-home interface or device by using data analytics, images and videos. If not all, most organs (body parts) can be grown  and harvested for the implant. Genetic and stem cell treatment would become routine. VR/AR will play an important role in the ER, and making it possible to conduct complex surgeries from thousands of miles away saving many lives.  Our life expectancy will increase significantly and we may just stay ever young.

3D printed food, meat, and fish grown in the labs, or even at home would become commonplace. Mass scale Shrimp grown in the lab/factory would be on the grocery store shelf by the end of this year and meat should be ready by 2017-18. Our refrigerator would know, what food item has expired it’s date and can’t be used, it will

know what and when any food item needs replacement and it would place an order for the name brand of our choice and exact amount/quantity at the best price and have it delivered at the doorstep-all on its own. Our items in the refrigerators will be optimized with personalized, ever fresh, nutrient balanced food items at the best price and at the right time. You will not wake up to not find eggs for your morning breakfast.

3D printers will be a common gadget in every household and we will produce a lot of personalized stuff that we use on a daily basis whether a coffee mug or a toy or nots and bolts and even complex objects. Human creativity will take front and center stage. Same thing with content. VR/AR will change our lives particularly, how we consume, use and share information. Our family members and loved ones can share and experience our lives in real-time. We will see personalization taking a new meaning. Bots will provide unique and dynamic conversational style experience.

Of course, autonomous cars will change our lives in ways we can’t even imagine. Do you want to make a trip to Disneyland with your family, 500 miles away? Just tell your phone/assistant – “Plan my trip to Disneyland for my family of four under $2,000”. That’s it.  A car will come and pick you up, book your tickets at the best price, find your stay according to your taste and budget and finally drop you off at home after the trip - all automatically. You may have to just give a command.

Sometime in future, your phone or some other device will know your needs before you know it and make it available at the exact time. A small implant will recognize that you will be hungry and in need of food in 30 mins and may, even order your food of choice for that time of the day from your favorite chef/restaurant and have it delivered and charge your credit card. You still have to eat it though.

When you come back home after a day of hard work, as soon as you start your car and say “go home”, the home would know who (Mr/Mrs/the kid) is coming, be ready to welcome you, temperature adjusted, food ready or delivered at your doorstep, music playing according to your taste, water temperature set for a hot shower and the right ambient of light for your mood and the evening.

The water sprinkler in my Los Angeles home would know when there is a water ration announced by the city due to drought, and will control the water usage accordingly on its own.

Trillions of dollars of wealth, unprecedented in the history of mankind will be created in the coming decade.

The dreaded thought that we all sometimes feel, half-way out on the road “Did I shut off the gas stove in the kitchen?” would be a thing of the past. As soon as you leave home, your home will go to a "safe mode" activating the security system and turning off the gas stove and anything else and minimize energy usage and maintain security. The home will be optimized from every angle you can imagine.

We will all own one or more drones and we can send the drones to pick up whatever we want from wherever we want. Have to pick up the packet from FedEx send the drone, have to pick up the groceries from the local store, send the drone, and pick of your clothes from the dry cleaner send the drone.  You get the drift.

Hyperloop and hypersonic planes would be real. Travel, as we know would be a distance memory.

Traveling from New York to London under an hour using a Hypersonic jet would become a reality by 2023.

There is exciting stuff happening in the space front. Few companies including Moon Express are trying to mine the moon and asteroids  or known as Near-Earth Objects (NEOs). We have no clue to the kind of treasures in there but suffice to say whoever can get their hands there will become super rich. Space tourism will become real soon, very soon. I bet a lot of folks will get married in space for fun. NASA says it will put humans on Mars by 2030. I bet SpaceX may do that before NASA.

Two big-ticket items in terms of market size and dollar spent: Defense/war and sex/dating.

The frontline of the war would be some tiny fly like devices with video cameras that will send enemy positions to the control room 8,000 miles away where a controller will direct a UAV to destroy enemy objects/positions. Cyber warfare will be huge where one nation will try to disable the capacity of its enemy computer and software.

Tinder will look primitive. Instant gratification for those who wants with the right person would be that instant. Complete personalized matchmaking where the machine will learn your personality, emotion and feeling by deep learning every aspect your life and can then match a potential suitor to perfection would become real.

AI will learn your present situation and future needs and manage your finance and investment to set you for your future.

You can see where I am going with this. The point is we are at the cusp of technological innovation that is beyond our imagination. It will happen much faster than we can imagine.

Did you see the news today? “Stephen Hawking and Yuri Milner launched a $100m star voyage program for interstellar travel. The project to aim for sending a featherweight robotic spacecraft to the nearest star.”

A vast number of entrepreneurs will try to explore the frontier of science, engineering, medicine, and space in a collaborative manner from all over the world and solve complex problems in record time.  Nothing would seem unsolvable anymore, no matter the complexity of the problem.

Thousands of social entrepreneurs will try to solve the basic needs of food, water, and shelter for the more than 70% of the world's 7 billion people living in difficult conditions in the underdeveloped or developing nations.

Huge challenges will offer huge opportunities. Tens of thousands of startups will be created over the next decade and they will need trillions of $$ of capital for investment. So while the Unicorns are getting adjusted to the reality in terms of valuation, there are thousands of opportunities waiting for capital. Hence the ever increasing number of VC funds and its size. The VCs need the capital now not years from now. They are afraid of missing the greatest opportunity of a life-time.

But what about the Unicorn downrounds? Are not VC’s losing a shitload of money? Yes and No! VC is just another asset class and like any other must be diversified to adjust for risk. Some VCs who have just jumped into the bandwagon to collect Unicorn logos to their portfolios without diversification may be affected. But most smart VCs have themselves covered for various scenarios in ever complex (read dirty) term sheets (preferences, rights, ratchets) and with well-diversified portfolios. They can still make a boatload of money. Read Fred Wilson’s recent blog post here.

You may think, yeah, but this is all in some distance future. Nope! This shit is all too REAL and happening right now. Just ask Elon Musk. I bet, even Elon didn’t imagine that Hyperloop would come as far as it has come since he  threw the idea open  only on August 12, 2013, and now it is planned  to be carrying passengers in 2018.

Tighten your seat belt- this is going to be a helluva of a ride!

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About the Author

Gyan Parida is a Venture Adviser and strategist who is passionate about innovation, entrepreneurship, startups and investment. As an Adj. Professor, he has taught the MBA, Venture Finance program at Pepperdine University, Los Angeles. He was the CEO of Silicon Alley Entrepreneurs Club of New York and also the Chairman of Global Venture Congress (Technology and Life Sciences) at Madison Square Garden, New York. He was one of the three US National Finalist, 2002 Ernst & Young Entrepreneur of The Year and Winner, Kauffman Supporter of Entrepreneurship Award. More about him on his site and his LinkedIn profile.  His primary social media presence is here.