Weekly Update #145: Bill Gurley Sounds the Alarm On Unicorn Financings

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Hello Investors,
The Article Everyone's Talking About: Bill Gurley
If you don't know him, Bill Gurley is a partner at Benchmark, a wildly successful VC firm with only 5 partners and no website (well, they have a website, technically). Gurley has really made a name for himself by leading investments in OpenTable, Uber and Zillow. 
He's also served as one of many voices of caution amongst the tech ecosystem. His most recent outcry concerns the spending and investing habits of Unicorns and their backers.
It's a long piece. If you are pressed for time, here's a quick summary:
  • Emotional biases (of investors, founders, and others) are keeping the market from accepting "down rounds" (where companies raise money at a lower valuation than their previous round)
  • Complex financing terms are being introduced to companies, that put investment structures in serious favor of institutional investors. These will lead to a day of reckoning when those financial terms are exercised by investors.
  • Companies need to optimize for profitability, not growth
  • The SEC is keeping a closer eye of all Unicorn financings

So what does it mean for EquityZen investors? As always, it's important to review the preferences for each share class within a company (don't worry, we always share this information on our Offering Documents).  Additionally, Gurley's piece is a reminder that investing in Unicorns, though less risky than angel investing, still carries risk.

Read Bill Gurley's "Why the unicorn financing market just became dangerous...for all involved"

In other news...
On the Road to Recap (Bill Gurley)
In February of last year, Fortune magazine writers Erin Griffith and Dan Primack declared 2015 “ The Age of the Unicorns ” noting — “Fortune counts more than 80 startups that have been valued at $1 billion or more by venture capitalists.” By January of 2016, that number had ballooned to 229 .
Why Uber Won (Greylock Partners)
The start of 2016 marked the end of the steroid era of startups — the time between 2010 and 2015 when money was cheap and more plentiful, and used as a performance enhancing drug for company acceleration. No question, venture money has always been used to accelerate company building. But this was different.
Phil Haslett | Founder + Head of Investments | EquityZen 

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