The Unbearable Lightness of Being a Unicorn
PublishedMarch 4, 2022
A newsletter by GV Ravishankar, MD, Sequoia Capital India, that explores a diverse range of ideas on scaling companies, personal growth, and leading teams.
Milan Kundera’s book “The unbearable lightness of being” raises some thought provoking questions about love and relationships. One important paragraph from the novel is worth mentioning here to set the context for this article.
“… is heaviness truly deplorable and lightness splendid? The heaviest of burdens crushes us, we sink beneath it, it pins us to the ground. But in the love poetry of every age, the woman longs to be weighed down by the man’s body. The heaviest of burdens is therefore simultaneously the image of life’s most intense fulfillment. The heavier the burden, the closer our lives come to the earth, the more real and truthful they become. Conversely, the absolute absence of a burden causes man to be lighter than air, to soar into heights, take leave of the earth and his earthly being, and become only half real, his movements as free as they are insignificant. What then shall we choose? Weight or lightness?”
I have read and re-read this para many times to understand why it spoke so much to me in the context of the current markets we find our startups in. Lots of capital raised in 2021, lofty valuations, high burn and the lightness that comes from drinking the Kool-Aid after being anointed unicorn status, only to come into a diametrically opposite and dark fundraise environment with the overhang of a potential world war! The burden of investor expectations (sometimes unreasonable) on a founder’s shoulders, the anxiety of navigating choppy markets and the compulsion to live up to the valuations and multiples of 2021! Founders of late-stage and public tech companies are under a lot of pressure this year. The lightness of valuations are making way to the heaviness of value creation. Now read the above para from the novel again – does it speak to you like it did to me? If yes, read on!
When markets are hot like they were for the last few years we (we = investors, founders, press) tend to succumb to some bad habits – we celebrate valuations and up rounds without asking if they were deserved, we celebrate speed over velocity (the latter has direction and hence is more representative of progress), and attention moves from defence (strong financial reporting, governance, compliance) to offence (growth, M&A, marketing).
We talk about vanity metrics, which many times are reported aggressively (grossed up GMVs, dressed up unit economics, etc.), and we aim to increase TAM through new launches and M&A. We take undue risks by taking on lots of cheap debt, and hope to get to profitability by scaling faster by spending more capital, and assuming the economics will magically come together at scale. The pressure on founders is immense and increases every time their competitor raises more capital, pushing them to pursue market leadership and higher valuations at any cost – sometimes overlooking the values on which the company’s foundations were being built. This heaviness of translating valuations into value creation is too much of a burden to be carried alone by founders. Remember, we are in this together!
Founders, you should know that you are not obliged to deliver valuations to your investors, but you are obliged to deliver value – for your consumers and your shareholders, including your employees. And delivering value takes time. Rome was not built in a day! We romanticize speed but what truly matters is that you eventually become an enduring and valuable business. Does it matter today that Microsoft was started a full 23 years before Google? What matters is that both businesses have generated trillions of dollars of shareholder value, delivered significant profits year-on-year and, most importantly, dominated their segments through market-leading enduring products. Company building is not a race – it’s an infinite game. Investors may have exit periods, but founders don’t. Then why hurry? Why focus on vanity metrics? Why take shortcuts?
“You are not obliged to deliver valuations to your investors, but you are obliged to deliver value – for your consumers and your shareholders, including your employees.”
Let’s take a step back; let’s breathe! Maybe this slowdown is actually a blessing for all of us. It may be time to acknowledge that we don’t need to look perfect, we don’t need valuations to increase exponentially or even linearly, we don’t need to carry the burden of the valuations ascribed to us. Why stress about things we can’t control and which are fleeting? Why not focus on what we can control? Adapting Winston Churchill’s quote “never waste a good crisis”, investors often say, “never waste a good downturn”. Maybe it’s time for founders to also use this as an opportunity. Let’s take the tough decisions we wanted to take but were afraid to, because a fund raise was around the corner. Make that leadership change you were afraid to make, cut those incremental revenues coming at negative contribution margins, and churn out those deal-seeking customers who came with no loyalty. Take a few steps towards becoming sustainable, even if it means you sacrifice some growth. It’s time to move from blitzscaling to fitscaling!
One decision-making framework that can help you make the right calls for the long term is the concept of ‘regret minimization’, made popular by Jeff Bezos. Let’s assume we are now in the last few years of our lives; let’s replay the decisions we made 30, 40 or even 50 years ago, and think about what we could have done better to reduce regrets in our lives. If we adopt this perspective, what decisions will we make today? What short-term choices and short cuts will we drop, knowing we really want to build for the long term? What non-negotiable values will we double down on to set the right example for the long term?
Now, do the right thing even if it creates short-term pain. Have honest conversations with your board members and advisors and get their buy-in for the way forward, and pick the path that maximizes the odds of building something enduring in addition to being valuable. There may be no better time than now when the market takes a breather and the focus goes back to value creation vs valuations!
We are now in 2022! “What then shall we choose? Weight or lightness?”
“Take a few steps towards becoming sustainable, even if it means you sacrifice some growth. It’s time to move from blitzscaling to fitscaling!”
Here are three articles I read over the last few weeks that I found interesting:
Career Advice: This blog post, which was published in 2013 by Moxie Marlinspike, who is co-founder of Signal messenger and previously the head of Security at Twitter, is a real gem. Moxie argues that we need to take our career choice seriously because the roles we take shapes how we think and who we are. “Your job will change you” he states. Before you choose a certain career, he suggests you should look at the prior generation of people in those careers. “Look at the real people, and you’ll see the honest future for yourself…they are the future you”.
How to want less: In this insightful essay for the Atlantic, Arthur C Brooks argues that the key to happiness and satisfaction is not to increase what we have, but instead to manage our wants. It’s not necessarily a new insight, but it is good to reinforce this in a world where we seem to keep chasing new things and wanting more and more! I have been discussing “less is more” as a good philosophy to adopt with a few of my friends, and this article is a timely reminder of that.
Eyedrops to replace reading glasses: Here is a reason to cheer if you are on the wrong side of 40! A few years ago I realized I couldn’t easily read the fine text on the back label of products and a visit to the optometrist resulted in a prescription for “progressive lenses”. I could never get used to having to look at life at “angles”. Now apparently researchers have created eye drops that can replace such glasses. Can’t wait to get my hand on these!
If you have time for a longer read, here are two books I’d like to recommend:
On the Shortness of Life, by Seneca
I read two different versions of this book to just not lose out any of the wisdom in its translation. This masterpiece by Seneca, a Roman Stoic philosopher and statesman, is summarized by one line: “Life is long, if you know how to use it”. The book is a reminder on how truly special our lives are and how from the day we are born we are in the process of dying and we have to make the best use of this time gifted to us by not wasting it!
Einstein’s Dreams, by Alan Lightman
This short read is a book of short stories written as if imagined by Albert Einstein after proposing the Theory of Relativity in 1905. In each story he imagines a world where time behaves differently from how we know it. In some worlds time is still and in others the time is circular and things repeat themselves.