Venture Capital Backed Unicorns that Become Unicorpses

(p. 1) The technology industry’s boom over the last few years has been defined by the rise of “unicorns,” the private companies that investors have valued at $1 billion or more. Before the term came into vogue, LivingSocial was among the biggest unicorns of its day. It now offers a glimpse of what some of today’s unicorns might look like several years down the road if things go awry.
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Venture capitalists anointed daily deals as the way that the Internet would invade local business, and by late 2011 LivingSocial had raised more than $800 million and reached a valuation of $4.5 billion, according to data from the research firm VC Experts. The company counted Amazon and the mutual fund giant T. Rowe Price among its investors. LivingSocial spent heavily, blanketing the airwaves with TV ad campaigns. Riding a wave of momentum, the company explored going public.
Today, LivingSocial is more unicorpse than unicorn. The company never filed for an initial public offering and consumer fervor for daily deals has cooled. T. Rowe Price has written down its stake in LivingSocial to nearly zero, data from Morningstar shows. The company’s work force has shrunk to around 800 employees from 4,500 at its peak in 2011. (Groupon, which did go public, is trading at more than 85 percent below its I.P.O. price.)
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LivingSocial may soon have more company. There are now 142 unicorns that are together valued at around $500 billion, according to the research firm CB Insights. Some of those highly valued start-ups are starting to show some cracks.
Snapchat, the messaging company, and Dropbox, the online storage business, were recently marked down in value by mutual fund investors. Zenefits, a human resources start-up, has said it missed sales targets and that it is slowing its hiring. On Wednesday, the payments company Square, which was valued at $6 billion by private investors last year, priced its public offering at $2.9 billion. Silicon Valley venture capitalists such as Bill Gurley of Benchmark and Michael Moritz of Sequoia Capital have warned that a unicorn shakeout is coming.

For the full commentary, see:
MIKE ISAAC and KATIE BENNER. “LivingSocial Offers a Cautionary Tale to Today’s Unicorns.” The New York Times, SundayBusiness Section (Sun., NOV. 22, 2015): 1 & 9.
(Note: ellipses added.)
(Note: the online version of the commentary was updated on NOV. 21, 2015. The wording of the last quoted sentence is slightly different in the print and online versions. The version above is the online version.)

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