Usually when people talk about a tech bubble and the startups that could be in trouble in a downturn, they are wary to name names.
But Danielle Morrill is the CEO and cofounder of Mattermark, which tracks all sorts of data about private companies.
In a post on Mattermark’s website on Friday, Mattermark CEO Danielle Morrill had a warning for startups that she suggests we call “zombie unicorns” — VC-backed startups with gross margins unlike traditional software companies. Startups that will have a really hard time raising more money in the event of a panic or an economic downturn.
“Now,” Morrill says, “with the rise of massive private rounds from late stage private equity and crossover investors, founders something new to worry about: Did you miss the unicorn window?”
Morrill went on to name names of startups she thinks could be in trouble:
“These are the companies who are spending $US1 to make $US0.20, with the hope that customer acquisition will pay off down the road (Draft Kings, Fan Duel). These are the companies who have to re-acquire their customer every time they want a repeat purchase (Kabam). These are the companies with unit economics that just don’t make sense (WeWork).”
When investors started predicting the death of unicorn startups earlier this year, Morrill went data diving.
“VCs love to say this stuff, but they never actually say who [the dead unicorns are],” Morrill told Business Insider earlier this year. “So I was thinking: how would you figure out which companies were really in danger? We have some really interesting data that we track that can give you some sense of how they’re doing.”
Mattermark examines the number of employees a company has, how much money a company has raised, a website’s estimated number of monthly unique visitors, app downloads, and more. Investors use Mattermark to keep tabs on startups. It collects data from a number of sources, including but not limited to: AngelList, Alexa.com rankings, app store rankings, anonymous sources, and social media.
The number of private tech companies valued at $US1 billion or more has surged so much this year that on average 1.3 so-called unicorn companies have been created every week in 2015,according to data from CB Insights. But that could all be changing now.
A report from Fortune’s Dan Primack, who went to San Francisco this week, suggests that the mentality of people in Silicon Valley is starting to change, and people are getting scared.
“As in the past, they are nearly unanimous in sentiment,” he wrote. “The difference now is that their sentiment is fear.”
At a SXSW keynote earlier this year, Benchmark Capital’s Bill Gurley warned that Silicon Valley’s optimism could eventually lead to the demise of some of these unicorn companies.
“I do think you’ll see some dead unicorns this year,” he said.
One week later, Sequoia partner Michael Moritz chimed in and stated, “There are a considerable number of unicorns that will become extinct.”