Let 2021 Be the Death of the Unicorn
My four-year-old will curse my name when he can actually read this: but, can we please let this be the year unicorns die?
I don’t mean the mythical creatures my son adores. I mean the myth of an overnight billion-dollar startup.
I say myth because it’s exactly that.
Before Ariana Huffington became the success she is today, her book was rejected by dozens of publishers. Countless stories like these are the ones that have heartened my belief that most overnight successes actually take a very long time. I often reflect on Sara Blakely’s story building Spanx. No one would deny that that woman has hustled her ass off for years to make that brand the success it is today, and herself a billionaire. She talks about how there was nothing overnight about her success. How she bootstrapped and hooked and crooked her way to where she is today. But I’m often struck by a singular point in her story, when Spanx was chosen as Oprah’s favorite product of 2000 which, according to her, really catapulted her brand. That was the turning point that put her on the path to billions. It was her combination of hustle and that incredibly lucky PR moment that all played out together. Had she not had the foresight, or even cojones, to send her product to Oprah, Spanx never would have been featured. It’s the combination of luck and hard work that is the formula. In my experience, this idiom exactly sums it up — “Luck is what happens when preparation meets opportunity.”
I’ve been so, so excited to see the generation of my peers achieve extraordinary things so quickly. There indeed have been many wonderful startup stories to celebrate — success stories. But let’s remember, they are stories nonetheless. The story: Outdoor Voices, RxBar — both wildly successful and started by 20-somethings all on their own. The reality: both founders were well-connected in their respective industries by their parents. Tyler Haney, founder of Outdoor Voices’ family worked in the clothing business. Peter Rahal, the founder at RxBar, also followed in his parent’s footsteps, whose families both worked in the CPG industry.
The number of brands you could name that were developed in the past 10 years and saw outrageous direct-to-consumer growth online via hugely successful social media efforts is long. Unfortunately, the list of startups aiming to be one of those unicorns and failing is much, much longer. Statista reports that of the 804,398 US-businesses that are started each year, 20% fail within the first year of operations.
I talk to prospective clients who have a notion that they’re going to put a coin in the slot machine of Facebook and come out the other end with an IPO. I have to continually remind people that that’s not how it works — that the start-up brands they point to and desire to emulate were not startups in the sense that the myth would lead you to believe. Scratching an itch of a problem, coming up with a wildly innovative idea in their kitchen, and launching a product that just happened to find a tremendous amount of demand and ultimately a billion-dollar valuation. It sounds so easy!
People love telling the stories of Harry’s Razors, Casper, Away, Warby Parker…. Squatty Potty even! Those are stories. Not reality. In reality, wildly successful companies are most often built over time with the combination of really damn hard work and really damn lucky breaks.
I’ve watched as an acquaintance launched the first portable, reusable straw. Her Kickstarter was one of the biggest ever, she raised millions of dollars, and truly overnight she was a “success”. Buoyed by a snazzy video that saw huge viral success among Instagram eco-influencers, she nailed the PR, got on a major national TV show and her product was great. She quit her job, moved to a very nice and expensive part of California, bought a house, got an office downtown, hired a team, and was seemingly living the dream. Man, I’m not going to lie. Jealousy hit me HARD. It took no more than a year or two for her product to suffer the consequence of a highly competitive marketplace with copycats and off-brands from both overseas and domestically that just tore through her market advantage. Unfortunately, we don’t see many overnight successes end up laying the foundation for long-term success.
I talked to a potential client about a year ago who had just gone from successful bootstrap to VC funded. After hiring a new team and bringing on consultants, the new marketing lead was convinced that taking their impulse-purchase grocery product and putting it in a DTC subscription box would be the game changer their company needed to be a unicorn. His confidence was underscored by the fact that they had an advisor who worked on Squatty Potty, so you know, success was a foregone conclusion.
I’ll tell you a secret most clients are shocked to find out: there is no secret social media formula to get people to buy your product. Tricks of the trade and dollars spent can only compete so much against the nine million active advertisers on Facebook (a number that’s more than doubled in the past four years).
While, yes, there was a time in recent history that Facebook (and now Instagram) was THE go-to avenue for performance marketing, even then, there is no magic sauce to it. If you have a great product and a great video, you can see traction. If you have millions of VC dollars to put into Facebook marketing, you can even get some really great results. You cannot put $500 behind a social post one time and expect a six-fold return on ad spend (ROAS).
That’s not real.
What people forget about those direct-to-consumer unicorns is that they had the money before they became unicorns.
The investments of unicorns like Casper, meant they could just absolutely saturate the market with marketing spend. Hundreds of thousands of dollars spent every WEEK on direct mail, TV ads, social media, and so on. Not to mention great PR because their story was so unique then.
Months before Casper launched, the four founders at the time, met with Ben Lerer, founder of Thrillist and CEO of Nine Group, who invested $1.85M in their company. With investments like these to pour into marketing efforts, coupled with the ROAS of Facebook ads in 2014, it’s no shock that Casper sold $1M in mattresses, just 28 days after launching.
Today, Casper continues to pour millions into their marketing, investing over half of what they spend on their mattresses. In 2018, Casper spent $200 million on their mattresses and about $126 million on marketing. According to Casper’s S-1 paperwork, they spent $422.8 million in marketing between 2016 and the end of September 2019.
We’ve all wised up a bit in the years since then after having been burned by the poisoned startup Cinderella stories of Elizabeth Holmes of Theranos or Away’s Steph Korey. It seems obvious that you can’t just post a video on Instagram or set up a fundraiser page and expect to raise millions and sell for billions. However, I’m always disappointed to find out I’m wrong about how obvious that is. Builders, creators — they have big imaginations. It’s how they came up with innovative and cool products in the first place. And I do believe there is a market out there for almost every product you want to build.
What I wish more entrepreneurs would come to peace with is: you can have a product and a company and it can be great. It doesn’t have to be a take-over-the-world social-media-killing-end-all-be-all unicorn.
While unicorn companies are shiny and captivating, their mythical rarity is a result of these lucky breaks and venture capital. So instead of celebrating unicorns, what if we celebrated the incredibly real, tiny, yet mighty local companies in our lives — who put in the hard work and continue to persevere without the luxury of luck or a million-dollar investment.
I want to hear more stories about people like Kathy Terry and Patrick Terry, the founders of P. Terry’s. Stories about companies that value their employees above an exit. Stories about the little burger stand that could become hometown institutions; known as well for easing the burden of hungry Austin families in need of a quick, quality fix as donating over $1,000,000 to those most in need in the community it calls home. We love those stories.
Because today it feels like a company that values its employees and its community is the true unicorn. That is the unicorn I am going to tell my son about.
So, while IdeaPeddler doesn’t work with any unicorns, we are so damn happy we get to roll-up our sleeves and do the long, hard work alongside the folks we’re lucky enough to call clients.
