I hate unicorn startups. Most of them are complete fakes. Take Fab.com, a typical unicorn startup that had great hype and marketing, but never a real business model and when one thing goes wrong, it collapses like a house of cards.
A typical unicorn startup has the following properties.
- A lot of hype and is great to look at. Looks almost unreal. The founders look and act like the next Steve Jobs (remember Theranos and Elizabeth Holmes).
- A ton of money behind it from flashy VCs who look and act like rainbows.
- A unicorn startup, like a unicorn, will collapse and need to be put down if the tiniest thing goes wrong, like a sprained ankle.
Unicorn startups are weak, fake, and built on hype. A few of them include Theranos, FAB, One Kings Lane, and Outcome Health.
In the case of Outcome Health, it was such a sparkling unicorn that it fooled even Google Ventures, Goldman Sachs and some of the top VCs in the industry. Everyone wanted it to be a unicorn and they fell in love with the founder story. Even politicians like Chuck Schumer, Elizabeth Warren and the mayor of Chicago visited Outcome Health and were spellbound by the company. Yet, in the end, it was all fake. A complete sham.
If you are an aspiring VC, please note that if you see these traits in a startup, run the other way — a lot of hype, flashy founders with no substance, a lot of money behind them, a product that is hard to explain / mysterious. These type of companies almost always break an ankle easily and need to be put down.
Now, a Rhino startup is what you want to invest in.
- Rhino startups are tough as hell. They don’t budge and if challenged, they get more into the fight. This is the trait I want in the founders of a Rhino startup. I love founders who are real and genuine. They know who they are and don’t pretend to be someone else. I remember living in Silicon Valley when Facebook became hot and seeing all these wanna-be founders walking around with a hoodie and acting like Mark Zuckerberg. Stay away from those founders. They are fake, flashy, and weak. They crumble at the first sign of trouble. I only invest in founders who know who they are and don’t pretend to be anything else. They may be rough around the edges, they may be difficult to work with, and they might not fit in the mold of a “typical founder”, but I know I am getting the real thing. I want founders who are tough, not afraid of a good fight and will not let go of something until they succeed. You can shoot a Rhino 20 times and they will still keep coming at you. Rhino’s don’t quit and that’s what I want to invest in. What I don’t want to invest in is a founder who like a unicorn, at the slightest sign of trouble, they crumble and run the other way.
- Rhino startups are hard to move and hard to stop because of their size and speed (yes, they run over 30 mph). I like startups that can build an unstoppable momentum behind them. A great startup will generate marketshare fast and make it impossible for someone else to stop them. Think of the network effect of Facebook, Microsoft and eBay. Or think of the utility value created by Google, WhatsApp, and Uber. All of these companies created such scale and momentum that they are hard to stop. In fact, these companies generate such a momentum that even company mistakes can be overcome. Think about all the mistakes Uber management has made and how most other startups would have crumbled. Yet, because Uber is such a good product with such scale, they can survive.
- They have a killer single horn. Their product is so good and so focused that it’s next to impossible for another company to catch them. Google did nothing but search for 6 years, Microsoft was just an OS for 7 years, and Facebook is still “only” a social network. Most Rhino startups are really really good at one thing and make a lot of money from it. I love companies that have a category killer product. Something so good and powerful, that’s its 100x better than the competition. A Rhino’s horn is a killer feature / product of the Rhino. I expect each startup I invest in to have something similar. In comparison, a unicorn’s horn is weak and fragile. It won’t do you much good in a fight. Most unicorn startups have horns like these. They don’t work in the real world. Remember the startup called Color. It had all the makings of a unicorn startup and the telltale sign was that they had a product no one wanted to use.
You will never go wrong investing in a Rhino.