My suspicion is that a lot of agents, and that what they mostly are, simply don't know how to evaluate businesses. A unicorn strategy has some desirable properties:
- You don't have to win many times. You can go years without a hit, and this is crucial in managing expectations versus customers.
- You can forget all the investments that merely do OK. In fact, you can push them to try to unicorn themselves, that way when they either die or you get a unicorn.
- When you find a winner, you can push the founders to take more and more money, raising ambitions to stratospheric levels. Again something that goes back to expectations management. You want to be able to say you funded Facebook.
- There's a degree to which unicorn business plans depend only on risk taking. That's what you're there to do. What I mean is, there are business ideas that naturally require a huge amount of capital, and only a few groups in the world will be able to find it and try it. Other concerns are real but when capital is your main issue all the players who find it will do similar things: expand into other markets, spend heavily on tech, try to monopolize.
By contrast, just making some nice businesses with a good ROI has some issues:
- The fund that funds ordinary businesses needs to show results pretty soon. After all you're saying most of your shops will do fine.
- Businesses that aren't burning cash like a sailor on leave need to make industry specific decisions that require specific knowledge. Not just spend a bunch of money in the hope of getting a monopoly, but spend wisely.
- You need more staff to manage a bunch of businesses in a variety of industries
- Some mittelstand business that's doing just fine will be totally unknown to your investors. They won't be thinking of you as "that guy who helped build that new ball bearing factory".