Thought Leadership

The Futility of Chasing “Unicorns”

Baseball has long been a sport that values home runs and grand slams (home runs hit while there are already 3 players on base) above all else, with fans and sports analysts alike often focusing on the big hits as the ultimate measure of a player’s worth. However, a sophisticated baseball enthusiast knows that this focus on grand slams may be misguided, and that the most desirable hitters are those with a high on-base percentage.

An on-base percentage (OBP) measures a player’s ability to get on base safely, including hits, walks, and even being hit by pitches. This statistic is widely recognized as a more accurate measure of a player’s overall offensive contribution, as it takes into account not only their ability to hit home runs but also their ability to get on base and contribute to rallies.

Conversely, the focus on grand slams perpetuates a “boom or bust” mentality that can lead to inconsistent and unsustainable offensive production. While grand slams can certainly be exciting and impactful, they are also relatively rare and often rely on a combination of luck and timing. Hitters who focus solely on hitting grand slams may sacrifice their ability to consistently contribute to their team’s offensive efforts.

Furthermore, the emphasis on grand slams can result in a lack of diversity within the sport. Teams may prioritize power hitters who can hit grand slams, even if it means sacrificing players with a more well-rounded offensive game. This can limit potential growth and innovation within the team and sport overall, as well as create a culture that values individual accolades over team success.

In contrast, focusing on players with a high OBP can lead to a more sustainable and consistent offensive approach. These players are more likely to consistently get on base and contribute to rallies, creating a more dynamic and diverse offensive attack. This approach can lead to more consistent success for teams and players alike.

As such, while grand slams may be exciting and attention-grabbing, the focus on these big hits is indeed rather misguided. The most desirable baseball hitters are those with a high OBP, as they contribute to their team’s offensive efforts in a more sustainable and consistent way. By prioritizing these players, teams can create a more dynamic and diverse offensive attack, leading to more consistent success on the field.

Now, while you might believe that this article is about the popular sport of baseball, in truth, it is actually about Silicon Valley. “Really?”, you ask. 

To be sure, Silicon Valley has long been a hotbed for startup investments, with investors seeking to find the next unicorn – a startup that achieves a valuation of over $1 billion. While the allure of such high returns is certainly enticing, sophisticated investors know that this focus on unicorns is misguided. To be more successful in achieving long-term, sustainable portfolio returns, investors in Silicon Valley and other startup ecosystems around the world should definitely consider shifting their focus away from unicorn startups.

Firstly, the unicorn mentality often leads to a focus on short-term gains over long-term value creation. This can result in startups prioritizing growth at all costs, even if it means sacrificing profitability or sustainability. This short-term mindset can lead to burnout and ultimately result in the demise of the company.

Secondly, the unicorn mentality often leads to a lack of diversity in the types of startups that receive funding. Investors tend to gravitate towards startups that fit a specific mold or have a proven track record, which can result in missed opportunities for innovative startups that do not fit this mold. This lack of diversity can stifle innovation and limit the potential for growth within the broader ecosystem.

Thirdly, the focus on unicorns can result in a culture that prioritizes hype and buzz over substance. Startups may feel pressure to generate hype and media attention to attract investors, rather than focusing on developing a solid product and sustainable business model. This can result in a skewed perception of success that prioritizes flashy headlines over real-world impact and steady, long-term investment returns.

So instead of focusing solely on unicorns, investors in Silicon Valley and elsewhere should consider a more measured approach to startup investments. This includes a focus on sustainability, diversity, and long-term value creation. Investors can seek out startups that prioritize profitability and sustainability, rather than simply prioritizing growth at all costs. Additionally, investors can broaden their investment portfolios to include startups that may not fit the traditional mold but have the potential for significant impact.

In conclusion, like measuring the success of a baseball player on the number of grand slam home runs they hit, Silicon Valley and other startup ecosystems should not measure their success on the number of unicorn companies they produce. One very important thing to bear in mind is that all great home run hitters have one other very specific thing in common – they strike out a lot. So, analogous to measuring a ball player’s OBP to gain a more accurate assessment of their overall contribution, startup ecosystems and investors should be measured based on how many of their portfolio companies are “singles, doubles or triples” vs. just home runs and/or grand slams. And to put one final nail in this point, nearly 1 in 5 unicorns no longer exist or are “under water”, i.e., below their earlier valuation in public or private markets.

So, let’s strive to create startup ecosystems that foster high numbers of successful, viable, profitable businesses, stimulating economic growth, job creation, increased tax revenues, innovation, international competitiveness, and numerous other benefits, versus merely focusing on creating unicorns. 

Let’s play ball!!

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