UK outperforms US in creating unicorns from early stage VC investment
cityam.com
cityam.com
While the “unicorns per dollar invested” stat looks good the “good ideas killed off because someone didn’t invest” stat looks really bad.
The US market doesn’t pride itself purely on unicorns created, but on the fact that it’s a vibrant ecosystem that invests in ideas even if they might not become a unicorn. That fact seems lost on the meaning of the headline.
Same data, different perspective and probably more the angle they were going for. Obviously ROI is ultimately what matters but risk tolerance is a thing.
That just seems like spin on what is essentially burning cash. I don't think it's a morally superior posture to invest in things that fail. I assure you VC's are turning down plenty of things because they don't seem like unicorns.
I mean Sequoia invested with SBF while he was playing league of legends in his pitch meeting. We're not dealing with geniuses here.
Most venture capitalism in the U.S. is basically snake oil. Companies with tenous ideas at best get pumped and pumped until they're dumped and the VCs move on to the next grift. Most recently, it was self-driving cars, then blockchains and cryptocurrencies, and now AI. I'm sure they'll move onto something next soon.
The snake oil self driving cars are peddled by Tesla, not VC.
Essentially they draw a hell of a lot of national pride from this 'doing more with less' attribute. It came about out of necessity during ww2.
Is it really surprising that this culture produces companies that manage to do more with less? No.
Germany has a strong safety and reliable robust engineering culture of ensuring things are always done perfectly to spec. Is it surprising their companies have a reputation for making reliable machines? No.
Does British scrappiness and pride in their modesty mean they're somehow better than other cultures that prefer to go all out about things? No.
Sometimes you just cannot do something with 2 brits in a shed taking pride in their modesty and NEED that american exceptionalism and balls to the wall with everything attitude to get things done.
Thats one reason that i believe america produces more unicorns at a faster rate relative to population than the UK, Americans believe in themselves harder and go big or go home more often with less reservations.
As an investor it shouldn't make you consider the UK any less risky, as Brits may go modest and go home just as often as any American company can goes big then home.
There's more than an element of truth to this, we do not always dream big enough or take enough risk. We are efficient and frugal sometimes to a fault.
However it's not the whole story, there are actually people who want to swing for the fences, but who cannot and ultimately end up either scaling back, failing, or moving to the US. There isn't good access to early-stage funding here, and there is no real ecosystem either.
We have absolutely obscene amounts of untapped potential, it's infuriating.
Two of my best success stories are along those lines, and I thought might hit favorable "10x" and "startup agility and resourcefulness" notes.
But in the US, I think the stories often land with the unspoken reaction of, "strange flex, bro: if that company were better, it would have raised more, and had rapid growth of headcount, on the way to a successful exit."
This might be a good application of LLM to large text corpus: label instances of US startup people of the past 2 decades (i.e., ZIRP, followed by crypto and AI gold rushes) speaking of how much they raised, and also label instances of them speaking of how scrappy they were with limited resources. Compare.
One big upside of UK business culture that I don't see much of anywhere else is once your proverbial two guys in a shed are making something useful then people do come out of the woodwork to help. The US seems to do that through investments, but the UK it's often customers deliberately paying more than they might strictly have to. I think everyone that has seen success of this form has stories of customers showing up and writing cheques bigger than the amounts asked for.
They're suggesting dollars invested in UK startups are more likely to create a unicorn than those same dollars put into us startups, hence higher performance.
I had the misfortune to be pitching to VCs in the UK, the money was so expensive that it’s just not worth it, much better off moving to the US if you can.
My impression of the US VC industry, especially near the end of the zirp era and even more especially during covid, the amount of VC capital being deployed far surpassed the number of competent VCs or startup founders.
Many VCs were making decisions based on factors that were NOT correlated with future venture success. Many VCs in fact probably biased companies away from future success, because they didn't understand what they were doing and their instincts from prior industries or investment regimes were directly the opposite of what was needed for an early stage startup.
In other words, there is risk aversion, and there is foolishness. I know for a fact there was a lot of foolishness going on in us VC investing (I even participated in some of it, learned from it, and I know better now).
I'm not just talking about VCs throwing money at anyone with a pitch deck. I'm talking about VCs having a backwards understanding of what makes startups successful and actively pressuring startups that could have worked into doing the wrong things.
There is a core of US VCs that are the world leaders in what they do, exceptionally aware of what makes startups successful and have the track record to prove it - this minority is overwhelming responsible for the industry's ROI. There is also a massive graveyard of fools who tried to replicate that success and failed for a variety of reasons.
We would all rather own a huge low margin business than a tiny high margin business. Eg, 5% margin on $1B of sales is better than 80% margin on $10M sales.
Some of the unicorns could be simply rent seekers making money by colluding with government people. Investors saw them sure shot and hence invested. That model is neither scalable not healthy.
The figure per invested dollar is much better: how many unicorns emerge per billion of investment money.
Those who chase unicorns are mainly investors (plus people who want to join startups that become unicorns). That figure is directly relevant to them.
e.g. Fremont was the top US city for startups
https://www.mercurynews.com/2012/10/09/fremont-ranked-top-u-...
Appleton, WI is the fifth best place to live in America
https://www.nbc26.com/appleton/study-finds-appleton-is-the-f...
The desired outcome from a wider economy perspective is to have more unicorns not efficiently created ones.
It seems like the tech version of the quarterly earnings per share game that has ruined Wall Street and publicly traded companies for the last 25 years.