Focus: SkyCity has revealed the ‘incredibly difficult’ decision to slash 700 jobs as the Covid-19 fallout hits. Video / File
COMMENT by Matthew Lynn
They disrupt whole industries. They "scale up" almost overnight. And they go from a bright idea sketched out on a phone to a billion-dollar valuation in the blink of an eye.
For the past five years, investors and venture capital firms have been searching for "unicorns" - as tech start-ups worth more than £822 million (NZ$1.6 billion) are known - while governments have been desperate to attract them to their countries.
Unicorns were the key to economic success.
Now, new animal buzzwords are catching on among the VCs.
The hunt is on for "camels" and "zebras": businesses that can survive long, hazardous journeys, or ones that are so flexible they can be both black and white at the same time.
True, on one level that is just faddish management speak. And yet, on another level, it reflects a deeper truth, as language often does.
Unicorns might have been right for the pre-virus world when demand was buoyant and money easy.
But as we recover, companies will need to be robust and adaptable - and, in truth, the economy might be better for that.
Rewind a few months and unicorns - named after a creature that is incredibly rare - were all the rage.
Uber and Airbnb were the best known, but there were 465 around the world at the start of this year, and another 78 joined the list during 2019.
Many of them were enormous.
At its peak, China's Ant Financial was worth an estimated $250 billion, Uber $150 billion and WeWork more than $67 billion.
Typically, they raised lots of money from investors in round after round of funding, and used the cash to aggressively expand around the world.
They were exciting, innovative, and they could make a ton of money for anyone who had a slice of their equity.
In a world where money was cheap, demand was buoyant, technology was changing rapidly, borders were open and new ways of working were emerging, many of them captured the moment.
True, a few might still turn into great companies, and a handful (such as Zoom, for example, now worth more than the entire American airline industry) will turn the lockdown economy to their own advantage and grow even faster.
The trouble is, not all of them are looking quite so healthy right now.
The "sharing economy" doesn't look like such a great idea in a world where a highly infectious virus can potentially be spread from surface to surface.
Not many of us are thinking about hopping into an Uber to spend a weekend at an Airbnb apartment.
And that WeWork office might be great for swapping ideas with other entrepreneurs, but right now it also looks like an over-priced hothouse for spreading disease, no matter how many pinball machines and artisan coffee bars it may have.
Even more seriously, "blitz-scaling" might have been a good idea in a world where you could always count on raising a few billion at your next funding round.
But if the cash isn't there, and you are still losing eight-digit sums every quarter, it doesn't look so smart.
Many unicorns, as the Silicon Valley wags like to point out, are looking more like unicorpses.
They have also started to hunt down zebras: swift, adaptable animals that fit into their environment and can be both black and white at the same time depending on what the situation demands.
Camels will be very different from unicorns. They will have cash, instead of burn rates. They will have profits rather than scalability. They will have roots as well as ambitions.
Likewise, zebras will be able to pivot and adapt, tweaking their business models, and creating new ones, as markets change and demand from consumers switches from one product or service to another.
In truth, these kinds of companies will be far better suited to the economy that is going to emerge over the next few years.
There won't be so much easy money around.
Central banks might still be printing the stuff like crazy, but it will be hoovered up by governments to pay for the damage the pandemic has done.
Borders may take a long time to reopen and markets will become more national.
You won't be able to scale your idea globally even if you wanted to. Sharing will be treated with suspicion.
And customers, staff and suppliers will want to work with businesses that are rooted in particular places, and haven't just descended on a market with an expensive app, lots of money to spend, and not much in the way of profits.
Camels might be slow, but they will generate their own cash, preserve what little they have, and get through some lean years with patience and fortitude.
They will survive this crash, and any others that come along - and over the next few years durability is likely to be the most important quality a company can have.
VCs might sometimes devote a bit too much time to the latest hip phase or trend. They can be faddish. But they are also very good at sensing the way the wind is blowing, and picking up on a change in the climate before anyone else. If they weren't, they wouldn't be very good at their job and wouldn't have any money to invest.
Investing in camels is the right decision for a world that has been reshaped by Covid-19.
If the economy had a few more of them, it would be in better shape - and certainly better than simply relying on lots of cash-hungry unicorns.
