Billion-dollar club in trouble ?

Like the fictional animal, unicorn companies are supposed to be rare and magical.

Last month, the Wall Street Journal compiled its ownBillion-dollar club a listof 78 venture-backed private companies with valuations of $1 billion or more.

When a company hits a billion dollar valuation, most people assume the company is stable and on a clear path to sustainable success.

The companies we pays the most attention to are consumer-facing, low-margin companies that need to get people online and using their services without spending too much on customer acquisition.

To identify companies that could be in trouble, we first looked at companies whose employee base has stopped growing or started shrinking.

So you look at some of these unicorn companies and you can see their employee count is kind of flat, or even maybe declining a lot or a little. And that’s a really bad sign because to IPO your company, you still have to begrowing pretty fast from a company perspective. Generally to grow revenue youhave to hire more people. It’s pretty uncommon to find some magical place where you can stop hiring people and your revenue still grows 100% year over year.”

The second major dead unicorn warning sign to look for: how are company’s social media mentions trending? If mentions increase and web traffic from social sites increase, then a company may be spending more on marketing.

Looking at the data, we also found patterns of companies that could be in trouble.

Related Posts

  • 78
    In 2009 Twitter was a 50-person company punching way above its weight in cultural impact, its micro-blogging platform blasting its way into the public imagination. But its ambitions were even higher. According to leaked internal documents, the company had privately set goals over the next few years of a billion…
    Tags: company, billion, revenue, startup
  • 76
    Uber was founded just six years ago, but it’s already one of the fastest growing companies in the world. As an illustration of just how massive the company’s growth has been, Uber has reportedlycreated over 160,000 jobs in the United States alone and plans to create over a million more…
    Tags: company, companies, startup
  • 75
    First, let’s figure out why we are talking about funding as something you need to do. This is not a given. The opposite of funding is “bootstrapping,” the process of funding a startup through your own savings. There are a few companies that bootstrapped for a while until taking investment,…
    Tags: company, startup, companies