How about this: You and I are going to have a competition to see who is the best salesperson. The winner takes home their day’s revenue in cash. Sound good?
Okay, you’re in. First, we each need to pick an item to sell. It can be anything you want. Then we are going to go out on the streets and offload as many of them as we can.
I guarantee I am going to win. Why? Because I am selling $10 bills for just $5. I hit the street, and after some initial disbelief, I start selling. Word gets out, and people are flocking to me in droves. I sell out before I’ve caught my breath.
Let’s see how I did: Units shipped? 10,000. Revenue? $50,000. That’ll do nicely, thank you. What about profit, though? Oh, I lost $50,000 — but does it matter? My revenue and growth are wonderful, and my happy customers keep coming back again and again.
Something doesn’t seem quite right, does it? Well, despite the absurdity of this situation, it isn’t too far from the truth for the world of tech unicorns.
Who cares about profit?
Growth is everything in the world of tech startups. The industry’s obsession with lists of the fastest growing companies, such as the Deloitte U.K. Technology Fast 50 and the Forbes Fast Tech 25, paint success as a hockey-stick-shaped growth curve combined with equally skyrocketing revenue regardless of the route those companies take to get there.
As I’ve written about previously, the pressure to hit these expectations can lead to bad behavior, such as the proliferation of a growth-or-die mindset. Some companies strive for growth at the cost of good business practices or the mental and physical health of their employees and can have a negative impact on society and the planet.
But what kind of grand mission involves losing huge amounts of money indefinitely?
But even if a hyper-growth unicorn has succeeded while doing everything right for its employees, one key factor is often an issue, and it happened to me in the example at the start…