Voice of the Valley: Communicating in a World Where Unicorns Again Are Rare Beasts

Rob Adler

Spend enough time in San Francisco, and you are likely to see anything and everything. Last year, in addition to the hippies on Haight and the hipsters in the Mission, there were regular sightings of the mythical unicorns. In Silicon Valley, unicorns are private companies with a value of more than $1 billion. These companies were given this name because of their supposed rarity. According to CB Insights, in Q2 and Q3 2015, 24 and 25 new $1B+ companies were created. In this quarter, the number of new unicorns created has returned to 2013 levels, which makes it a good time for marketing communicators to look for lessons learned.

From a PR viewpoint, what made the unicorn phenomena so interesting, beyond the sheer numbers, was the fact that the valuations were being discussed and even promoted by startups. Making the private company valuations public is a relatively new occurrence. Traditionally, the total amount of a funding is announced, but the actual valuation is kept confidential. Reporters would typically ask, and we PR people would politely decline to answer. So how did we end up in a world where startups would promote their valuation as a public badge of validity?

city-cars-traffic-lights.jpgSource: pexels.com used under CC license.

In Silicon Valley, everything revolves around attracting the top talent. Here, high salaries and seemingly unlimited perks are table stakes for top talent. So startups need an edge to attract the best people when competing with the Googles and Facebooks of the world. Every startup offers stock options. But people here know most startups fail and usually stock is not worth the paper it’s printed on. Stock options in a billion-dollar company is far more likely to be in the money. Right? Right! Well, that was the story being promoted at the time.

Also, startup valuations were being reported even when the company didn’t put it out there. Enterprising reporters figured out ways to look behind the curtain to find valuations. The gold rush to fund the unicorns attracted sponsorship from mutual funds, which typically only invested in tech companies once they became public. Recently, they decided to jump the line and get in on later private funding rounds of hot companies that seemed likely to go public. Hot companies like Uber were now able to put off going public by raising large private rounds, which brought them in the investment range of mutual funds. Startups were more than happy to take their money.

Startups did not realize that mutual funds are required to publicly announce the current market value of their investments, including private startup companies.  So reporters started reviewing the quarterly statements of mutual funds to find out how they were valuing startups. This meant they had to show the market value of funded unicorns based on similar public companies rather than frothy original private funding. Nothing like a regulatory filing to be a buzz kill.

There rise and fall of the unicorns provides an important lesson learned for modern marketing communicators: focus your message on value, not the valuation. Value is the benefit you provide to users, customers, partners, etc. It is tangible and enduring. Apple, the world’s most valuable brand, is built on tightly integrating hardware and software design to deliver to a “magical” end user experience. That results in loyal customers willing to wait in line for days for new products.

On the other hand, valuation changes regularly. Using Apple again as an example, its stock price can vary by a billion dollars daily. Yet, its customers follow news of new features, not the latest stock price. Apple’s philosophy on hiring employees is reflected in the memo it gives to new employees on their first day, which highlights that people who join Apple want their work “to add up to something … something big … something that couldn’t happen anywhere else.”

Valuation is a double-edged sword. Tying your public perception to valuation when it’s high might have some short-term benefit. But it evaporates when the valuation inevitably goes down, along with the employees that joined in hope of hitting a jackpot.  

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