From MarkStCyr.com, by Mark St.Cyr
For the average person the daily headlines containing the words “missile” and “nuclear” bring about thoughts of fear and anguish, especially when they pertain to the realization in which this time – it may be different. In other words, the sudden misstep resulting in an actual nuclear incident is far more probable than possible. e.g., N.Korea as the latest example.
However, not withstanding or minimizing any of the above, there is something just as closely being watched and the implications for what many (especially myself) would deem as a possible extinction level event is playing out right here in the U.S. Although, this one does not involve anything pertaining to military.
No, this one is the current nearly unstoppable “chain reaction” type event happening in the once unfathomable business unicorn known as Uber™.
This slow motion train wreck of what was once The unicorn of all unicorns in the current stable seems to be not only imploding – its once argued defense shield worthy of DARPA against any and all criticism seems to not only have been assailed, but appears to be all but destroyed by Uber itself with the latest headline that its head of communications (i.e., PR) Rachel Whetstone has now joined the growing list of high level executives to “dive out the door” of this still moving investment vehicle.
Regardless of the reasons, or innuendos circling about with this latest staff change, one element is undeniable, and it is this:
When a company’s head “PR” person quits smack dab in the middle of what can only be recounted as one of the most disastrous yearly beginnings in Uber’s short history (i.e., scandals, senior management leaving, CEO melt down caught on video with a driver, and more) and that company just so happens to be the most valuable start-up (e.g. a unicorn said to be worth some $68 BILLION), while also claiming the title of “disruptor of the disrupters”, and, is a cash burn machine with no concrete date for IPO? It’s the equivalent of a harnessed team of (e.g., all of The Valley’s) unicorns running smack dab, and full stride – into a concrete abutment. The resulting carnage will be legend.
Unicorns everywhere (primarily the ones whose sole goal was for the explicit reason to disrupt, regardless of profitable business metrics, fundamentals, or even laws, get funded, IPO, and cash out, rinse repeat) have hitched their dreams to the likes of Uber ever since it entered the marketplace.
Many held this company up as “the role model” for how to run, how to fight, and how to play by your own rules regardless if those rules may turn out to be in violation of known laws. i.e., “It’s all about disrupting and the Benjamins – screw everything else.” (i.e., AirBnB™ and it’s now legal issues as one example)
That works when it’s all “free money” supplied by an ever complacent Federal Reserve. But when that complacency is over (which now it clearly is) business fundamentals such as cash on hand, cash burn, net profits, management team, business metrics, execution, et cetera which were shunned in the “go-go” period come back with a vengeance.
So much so anything to do with “funding” seems more like being hailed to the executioner’s block rather than being invited to the all night parties which transpired after drooling V.C.’s threw money at their heads.
Suddenly, here’s where “funding round excitement” takes on a whole different connotation.
2016 was supposed to be the “rebirth year” of the IPO. Hint: It wasn’t. 2017 was also supposed to be the make up year for all prior sins with the announcement and fanfare of Snapchat™. Again, hint: It’s been anything but an unequivocal disaster in terms of stock price swings from gains to now losses on nearly everyone who’s purchased since the opening quotes, but that’s just my view. If you were one of those who did purchase? You have my condolences.
And, I’m sorry to say, “It appears to be getting worse.” Why? Because it’s (once again) sliding back into “teenager” territory, threatening to even make those early coveted $17 pre opening bell holders into losers as well. Only time will tell, after all, it’s only been 45 days or so to wipe out nearly all the gains prior. And if there’s any solace in the old adage “Misery loves company?” Cheer up, for I’m betting you’re far from going to be alone in the not so distant future.
If – and I do mean just that, Uber needs to go back to the “funding” rounds (and it’s easy to speculate it will need to with its self verified cash burn woes) with all the exposed dirty laundry, and excess baggage now exposed to the entire investing world and “Valley”, coupled with its extraordinary cash burning metrics and collapse in “growth ” story (i.e., China being just one) where the last funding round (June of 2016) was made via the Saudi Arabia’s Public Investment Fund.
Who’ll want to step in after it’s assumed that this company has now also burned through $3.5 Million of Saudi dollars – and now needs more?
And what will it take to entice? If it’s a “down round?” (insert hair-band ending Europe’s Final Countdown song here in sympathy)
This is what is now creating the fear and loathing in not only the current V.C. cadre with investments sunk so deep into the remaining unicorns awaiting IPO pastures, any (if not most) returns are appearing to be all but lost. That’s bad enough – but that’s not all.
It’s also manifesting in much the same ways for any of those remaining “Valley” models looking, and still believing, they can just launch another funding round to survive. All I’ll say after looking at the current turmoil growing ever-the-worse by the day with its star unicorn, is this: “Good luck with that.”
In my opinion: They are all teetering on the edge of extinction if (or when) Uber has to do the near unconscionable act and hit the button and launch – a down round.
This I’m quite confident (just like when I stated most IPO’s were dead already but just didn’t know it a year ago) if it happens will force many in the current “unicorn stable” to tell their current investors: “After careful consideration it seems making a true net profit is once again a business fundamental which they can no longer circumvent, and will now liquidate in an effort to conserve any (if there is) possible cash or value.” Rather than face the
executioner’s V.C.’s newly found funding wrath.
And with that here’s what may be a small window into what future “funding rounds” may look like after the glitz and glamor of the past where “metrics to nowhere” or “who cares about customers, investors, or profits – we’ve got a party to throw!” and more have been the norm, only to be dispatched (as they should) to the trash bin of investing history. To wit:
“Are there any takers to invest in this once in a lifetime opportunity to disrupt _______?” (fill in the blank.)