I’ll admit to a certain bias here, but to me 2019’s two greatest fiascos were the performance of my Cleveland Browns & the aborted WeWork IPO. While early returns suggest that nobody affiliated with the Pumpkin Helmets has learned anything from their disastrous 2019 campaign, a recent PitchBook article says that VCs actually may have learned a thing or two from WeWork. The article suggests that their hard earned wisdom may be a game changer for the IPO class of 2020:
The collapse of WeWork shook up Silicon Valley, and it will likely mean elevated levels of scrutiny for any unicorn that’s planning to go public in 2020, a list that could include names like Airbnb, DoorDash and GitLab.
Taken as a whole, the debacle was the single biggest cause of a reckoning among VCs and startups that occurred in the final months of the year. It brought a renewed focus on profitability (or at least the potential thereof), as well as questions about whether VCs have become too founder-friendly and pushback against SoftBank-style excess used to finance explosive growth at all costs.
Silicon Valley seems to be embracing a newfound austerity, and WeWork deserves much of the credit—or much of the blame.
With its hockey-stick growth, heavy losses and extremely founder-friendly share structure, WeWork was a lot like some of the other unicorns that went public earlier in the year (including names like Lyft and CrowdStrike), only more so. In recent years, VCs had accepted that red ink and bowing at the feet of founders were the prices they had to pay to get in on rounds being raised by the hottest startups. But WeWork showed what can happen when those trends reached their logical endpoint.
The article says that Wall Street’s new-found unwillingness to buy into the fever-dream valuations of these companies appears to have woken VCs up to the risks associated with dumping piles of cash into money-losing ventures with governance provisions designed to cater to the whims of diva founder CEOs. If so, good for them.
On the other hand, I guess we’ll just have to see whether the Browns have learned anything about catering to the whims of their own underachieving divas. We fans have two decades of reasons to be skeptical about that.
-John Jenkins, TheCorporateCounsel.net January 8, 2020
