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Comment by freeelncer | Hacker News Reader

I wish the day will come where we’ll stop callimg companies “Unicorns” that are “valued” at a billion dollar based on equity negotiations done by investors and founders and instead, call companies unicorns when they “profit” a billion dollars a year. That, my friend, is an achievement worth giving a mythical name.

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A thing is worth what someone else will give you for it.

You're asking for the core mechanism of wealth creation in technology to be dispelled.

If enough people, over a credible amount of time, say that a company is increasing in value, and if they back each such assertion with a small percentage of that stated value, then eventually said company can be taken to the public who hopefully will agree and put up their money to validate the game.

> A thing is worth what someone else will give you for it.

You are correct, however, selling 0.00001% of my company to some schmuck for 100$ does not mean people are willing to give me 1 billion dollars for te rest of it. Many so called "unicorns" seem to be closer to that scenario than to actually having a market valuation of 1 billion dollars.

Most 409a valuations will value the common at around 1/3rd the price of the last preferred and of course you need to discount the preferred lower in the stack so it’s not as simple as #outstanding shares x $highest preferred unless you have a liquidity event where someone has set the price for the common shares.

If I invest X money at Y 'valuation', but I get more than just stock such as liquidation preferences, then the stock alone it's not actually worth X money. Or if you prefer my stock + what else I get is worth X money, but the other shareholders lost something of value.

Thus the company is not actually worth Y valuation and pretending otherwise ignores the terms of the deal.

EX: If the company is nominally worth 1 billion at the time of investment, and later sold for 900 million the last investor may actually have profited via money that early investors never received.

> You're asking for the core mechanism of wealth creation in technology to be dispelled.

what is, or is not referred to as a "unicorn" is not a core mechanism of wealth creation.

all they said was "I wish ... call companies unicorns when they “profit” a billion dollars a year."

obviously the valuation mechanism can't change, but we could all agree to be less impressed by noisy valuations, and more impressed by realized profits.

In the case of $1 billion in profits, we should call those companies Sumatran Rhinos or some other endangered species. While very rare, they are still real animals. In my opinion (not speaking of Canva in particular), equating a billion dollar startup with no profits and a questionable business model to a mythical creature which only children believe in is quite apropos.

craigslist is probably close to qualify in your definition

About $500 million profit, with ~$700 million revenue. Still kind of shy, but that profit is pretty astounding!

https://en.wikipedia.org/wiki/Craigslist

If those numbers are correct and the number of employees is really only 50 as on Wikipedia it's time to be really impressed.

I find it very useful for one reason: the senationalism around it makes the companies far easier to track and learn about because they frequently pop up in the media thereafter. Typically you're going to get a lot more articles written about you at a $1b valuation than at $200m. There are hundreds upon hundreds of interesting technology companies around the world, most are difficult to learn about initially, or to find at all. The unicorn / billion dollar tag gets them plastered everywhere.

Profit (whether gross, operating, or net) is also an imperfect measure. For many extremely fast growing companies, being profitable is a bad thing; it's what happens when they run out of ways to re-invest revenue into growth.

Good point, I'll be happy to refer to a company as a unicorn if they do 1 billion in annual revenue and positive net profit.

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