Post #64: A modern fairytale

In what seems like a now long-distant era, the unicorns were many. They were happy. They continued to grow in number and size, even if they became more unstable at the same time. Then the virus came along and the unicorns started to disappear. It was a long time until they began to flourish once again.

There is a serious point to all the above: it takes nothing like a good crisis to test the robustness of unproven business models. Warren Buffett’s famous observation about just how exposed are those “swimming naked” when the tide goes out seems highly apposite. Consider, for example, the plight of scooter-rental companies such as Lime or Bird. What happens to businesses such as these when people are told to stay at home? Then think about the We Company (formerly WeWork), viewed by many as the unicorn poster-child. Was it a tech company, or has it taken the current epidemic to reveal that it was simply a property business, currently with a lot of empty offices? Recently-birthed unicorns on the public markets such as Lyft and Uber have both seen declines of ~50% in their valuations since listing.

From every crisis does, however, spring opportunity. If ever there were a cause for optimism, then consider that while the Great Depression wrecked economic havoc, it also produced some radical new business models. Many of the things we now take for granted – from mass automobile production to cinema-based entertainment and beauty products – emerged in the 1930s. Furthermore, more patents were filed in the US in 1929 than in any other year of the 20th Century. A lot of people are sitting at home with time on their hands certainly have the ability to come up with new ideas…

So what might evolve? This is a question we are spending much time currently considering. Based on what we are seeing, by forcing people to work, shop and amuse themselves from home, the crisis may be highly positive for online companies. Such a dynamic should boost businesses that already sit at the heart of the digital ecosystem (e.g. data centres and cloud services). Many new models will also undoubtedly evolve. The areas of messaging, cybersecurity, payment and entertainment all look ripe for further innovation; healthcare too, although we will save our thoughts on this topic for another post. Watch this space.

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