Editor’s note: Tom Jacobs is CTO at Kepler Analytics.
Of course Airbnb is worth a billion dollars. There’s an expensive asset there sitting unused. People often struggle to make rent. Hotels are expensive.
Of course Uber is worth a billion dollars. Taxis are awful, expensive and unreliable, and I’m pretty sure I was sitting in some sick in the last one I took.
Think back to 2009. Remember when you first heard of Airbnb? I remember I rented out my studio apartment in SF on Airbnb while I went overseas for a month on a company workcation. I didn’t think much of the service at the time, just that was nice to not have to pay that month’s rent, and Craigslist would have done just the same. But Airbnb had pretty pictures and a step by step property listing wizard. Big whoop, I would have considered investing in Craigslist just as much as in Airbnb.
I remember when Travis showed me a startup he was advising where you push a button and a black car comes to you and drives you where you want to go. Cool project I thought, but I don’t see myself or too many people using it, because I barely take taxis, they’re too expensive to use often, and this is almost double the price. “Imagine if you could do it peer-to-peer, have randoms use their own car to give you a ride” my extra cost-conscious friend said.
Looking back now from 2015 it’s so clear why these companies are worth over a billion dollars, and that we all should have sold our kidney and invested everything we had into them. They move millions of dollars a day now.
It wasn’t obvious back in 2009. But as a thought experiment, what if we could remove all of the knowledge we have today, think back to 2009 and figure out the key insights that would make us want to invest in Airbnb, Uber, Twitter¹, Dropbox and others, then come back to 2015, and apply those insights to the ideas of today?
Not by pattern matching, as unicorns are necessarily unique with their own specific insights and timing, but by using some underlying truth that remains relevant to the companies starting today that in five years will be moving millions of dollars a day, or getting millions of people to devote their precious attention to every day.
In other words, how can we better predict unicorns?
I’m sure this thought experiment is what 90 percent of a VC’s day consists of, mixed in with talking to some potentials.
There are big commonalities between Airbnb and Uber, of course: an unused asset plus basic skill, two of the top three yearly expenses for people (housing: 18 percent; food: 17 percent; transport: 16 percent). All it took was for that need to inevitably overcome the social weirdness of doing it that way.²
As for the other unicorns, I’d sum them up like this:
Dropbox, Box, Evernote, Slack: Hey computers are handy.
DeliveryHero, Instacart, Spotify. I want it now goddamn it.
Atlassian, MongoDB, IronSource: Software makes my business go fast.
Square, Stripe: Damn that’s better. So much easier.
CloudFlare, AWS: The Internet is happening. Level it up.
Shopify, Automattic, SurveyMonkey, HootSuite: Wait, you mean I can just run a whole company myself from home?
Xiaomi, Dianping, Meituan, Koudai, Lashou, Sogou: China is big and coming online right now.
Pinterest: Computers are fun?
(Also, judging by the large number of companies worth exactly $1 billion, it’s worth something to only just scrape into the list.)
Obviously there’s a lot of interest right now in the “I want it now” category. Uber for cookies definitely sounds like the next quad-decacorn to me.
The biggest common trend I can see among all of these is that they had the chance to ride an unexpected wave of behavior that was enabled by a surprising new broadly rolled out technology. (Isn’t that what Silicon Valley is all about? Doing cool stuff with new things that were just invented and made cheap enough for everyone to use?)
Technologies, such as iPhone computers in pockets, powerful desktop browsers being pushed, powerful cheap numerous servers, and something that I don’t understand why we didn’t try before: connecting computers to the real world at a large scale (banks, telephones, restaurants, people).
So to predict the unicorns, we need to make some bets on what trends will take us by surprise over the next decade and what will get real big real fast.
Over the past five years we’ve had a few things come out of nowhere to redefine how a huge portion of the world now spends their day: social media; messaging; Internet speeds and availability. (That last one didn’t come out of nowhere, and will only increase and have a step function soon.)
But to me, the most interesting trend to watch over the next decade is the one of: “You mean I can just run a whole company myself?”
It used to be that 30 percent of the U.S. workforce were freelancers. It’ll soon be 40 percent. You needed to be part of a big company to produce a good product or service or make a good living from your own skill. I think never before in history has it been so easy for anyone to run a seemingly huge looking company or reliably valuable service just from their home or by themselves. Even a non-technical person can start their own company pretty easily and be selling their product, service or skill without investing thousands of dollars or months of risk and fit out.
In other words, it’s the rise of the solopreneur.
We’re starting to see it with Uber drivers, Airbnb hoteliers, and even Etsy sellers (although that’s not a good business model, to be making each product by hand, until the hipsters start paying 1000x markup for them).
So, what do you think the next unexpected wave will be, and which startup or idea of 2015 will get lucky and ride that next big wave? Don’t say it, unless you’re going to invest in it.