In the thirty-one months since the investor Aileen Lee popularized the term “unicorn” as shorthand for a startup technology company worth a billion dollars or more, the concept has gone from novelty to gestalt to frenzy totrouble to embarrassment. Some unicorns have been sold for a fraction of their once-billion-dollar values. Others have had investors mark down the value of their stakes. A few, like the blood-testing company Theranos, have been accused of fraud, hinting at a rot beneath other startups. But one transformation wrought by the unicorn phenomenon endures: where company valuations used to be concerns that were tertiary to their identity, how much a company is worth now defines it. This change looks an awful lot like what has happened in the world of art. Later this week, for example, artists, curators, gallerists, and buyers will assemble at the blingiest of the art world’s annualbig-money fairs, Art Basel, in Switzerland. The wealth on display, and the market’s influence on how the work is received, has become, over the decades, apermanent feature of the event.
In tech, the shift was much more rapid. Lee’s billion-dollar figure set an arbitrary but gee-whiz number as the entry fee to a club of success. More subtly, it transformed “worth a billion dollars” from an adjective to a noun. And then, in a blink, that noun became an essential fact of a company. In her article, Lee counted fourteen private unicorns; today, TechCrunch’s unicorn “leaderboard” lists a hundred and sixty-eight, a hundred and two of them in the United States. This growth was driven by a feedback loop that established itself in the venture-investing world: to attract capital and recruit employees, a company had to prove that it was a unicorn or on its way to becoming one. Prospective unicorns modelled their investor pitches on the triumphs of Facebook or the current lead unicorn, Uber—and on the battle cry of “U.R.L.” (ubiquity first, revenue later). With no limit to their ambitions, they gorged on capital.
For a private company to be worth a billion dollars, it doesn’t have to be bought for that amount or even raise a billion dollars from investors. Someone just has to pay ten million dollars for one per cent of it. (Airbnb, for instance, is worth twenty-seven billion dollars, even though investors have put in only 2.4 billion dollars in cash.) Each time investors provide more cash to a company, they determine how much that company is worth. Unicorn-hunting investors steadily drove up equity prices, with the potential for market ubiquity embedded in their financial models, with no company profits (or sometimes even revenue) to anchor their estimates of worth, with capital flowing into the system from experts and amateurs alike.
The art world knows about prices floating ever higher on abstraction and hope. The resonances aren’t completely coincidental. Both venture capitalists and art buyers are in the business of valuing the invaluable. Both stake their reputations on exquisite selection. Both nurture talent before it can support itself. Both have a soft spot for youth, for unbowed ego, for the myth of solitary genius, for the next new thing. Both operate in a world of frustratingly limited information and maddeningly unpredictable success. Both depend on consumer culture while holding themselves superior to it. And both the art market and venture investing have become increasingly winner-take-all games, with more clout to the companies and artists backed by the most powerful dealers or venture capitalists.
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