What 2001 taught us about the fall of the unicorns
No comparison possible between today and the bursting of the Internet bubble in 2001, one might think. Strong business models, income, real, growing. However, in recent months, the significant drop in the prices of several Internet stars, the depreciations of unlisted unicorn assets inevitably evoke some memories for some of us. What have we finally learned from this already distant period?
The stock market does not reward the past or the present, it buys the future
The stock market is only partially interested in the “good results” presented. If the pace of growth slows, if profit or loss reduction does not follow the expected curve, confidence soars and the stock may be slaughtered in a matter of days. The stock market buys the future. In 2001, well-established businesses lost up to 90% of their value within days. To finally land valued at less than 50% of their cash. What does it mean to be valued less than 50% of your cash? This means that the market doesn’t believe in you so much anymore that it thinks you won’t even be able to take care of the cash you have left, and that it will decline quickly. Today, the valuation of a good number of unicorns is based on partly unsustainable growth expectations. The slightest grain of sand (impacts of legislation, arrival of a new breed of competitors, etc.) and the machine cannot deliver the expected results. Because in the world of the Internet, if there is anything that we have been able to learn in twenty years, it is that the expression “all things being equal” means nothing. The ecosystem rebounds from disruption to disruption and the transition from the business model to “full power” mode is often thwarted, even though it has reached the moment when it should be expressed.
The price of arrogance is always higher than you think
When everything is successful for you, when the money is flowing, when you have become an Icon business, it is extremely difficult not to take a big head. Not to proudly show staff around his kitchen, open day and night. Not to poach at all costs in the ecosystem. Not to think that clients are very lucky to work with you. Not to impose new rules of the game on customers and partners alike, even thinking that they should thank you. So difficult that many structures, as in the 2000s, have taken on the habits of arrogant nouveau riche. This easily recognizable pattern, which we thought disappeared 15 years ago, and which has come back …
What did the bursting of the bubble teach us? Revenge is a dish that is eaten cold. Customers who have been chomping at the bit for years, partners who have backed off and swallowed snakes: when the tide turns, everyone lets go and pulls the ambulance.
Even when everything is going well, you have to treat your clients and partners with respect and humility, because the tide always turns. Microsoft has understood this well. Its ecosystem of 400,000 partners acts as a real shock absorber during less favorable periods. Microsoft has built a lasting and strong, humble relationship, even with the smallest of its partners.
Consanguineous recruitments are a real danger in the event of a fall
The elitist spiral of unicorns, fueled by hunting firms, creates a sort of parallel world of recruitment. Young prodigies go from unicorn to unicorn, a bit like the “circuit” of the 2000s. A problem? Yes. When your workforce is made up of people accustomed to success, to sporting the colors of a trendy company, as soon as problems arise, it is like the end of the world. No, we no longer receive you on a simple phone call. No, we no longer show up with you. Yes, business becomes very difficult even when you have done a great job. Yes, the world of work is unfair. Yes, your stock options are no longer worth anything. The 2000s taught us one thing: when your trendy workforce sees the world change, the fall is very hard. This is why it is essential to recruit people who have known difficult times, personal or professional. From obscure and unknown companies. These people will know how to wake up when difficult times arrive, like reservist soldiers who in a situation of danger rediscover their survival reflexes and go into battle.
External growth is not a parachute
When the fall begins, it is usually that we have missed a turn. Too sure of yourself, too busy making the machine purr rather than listening to weak signals. History in the 2000s has shown that external growth in an attempt to save furniture rarely works. Toys bought one after the other, taken apart and broken to understand how they work, in vain, only accelerate the fall. It is total internal change, driven from the top down and from the bottom up, that can save a business. Facebook has become a Mobile First company under the leadership of Mark Zuckerberg who sensed the danger, and who combined massive external growth and change of vision. To continue to win, you have to regularly accept the risk of losing everything.
Graduated from Ecole Centrale Paris, founder in 1994 of the digital agency FRA, sold 7 years later to Digitas, Jean-Louis Bénard participated in the implementation of the first e-commerce platforms in France, including Ooshop.
Since 2003, he has been CEO of Brainsonic, digital agency and publisher of the Sociabble cloud platform, present in Paris, Lyon and New York. He is also co-founder of Novathings (connected objects). Author or co-author of several works including Extreme Programming (Eyrolles), he acts as an Advisory Board Member at Ecole Centrale Paris Executive Education.