Great startups aren’t being founded like they were in the 1970s (Microsoft, Apple, Oracle, Genentech, Home Depot, EMC), 1980s (Cisco, Dell, Adobe, Qualcomm, Amgen, Gilead Sciences), and 1990s (Amazon, Google, Netflix, Salesforce.com, PayPal). All of these startups reached the top 100 for market capitalization, but Facebook is the only startup founded since 2000 which has entered the top 100. Tesla and Uber are often discussed as highly successful but they have many times higher cumulative losses than did Amazon at its time of peak losses and neither has had a profitable year despite being older than Amazon was when it achieved profits. Furthermore, few of the recent Unicorn IPOs have experienced shareprice increases greater than those of the Nasdaq (14 of 45), only 3 of these 14 have profits, and only six of them have a market capitalization over $30 (Zoom), $20 (Square), and $10 billion (Twilio, DocuSign, Okta). America’s venture capital system isn’t working as well as it once did, and the coronavirus will make things worse before the VC system gets better.

1. Where are
the Next
Googles and
Amazons?
They should be here by now
Jeffrey Funk, Retired Professor and Consultant, April 6, 2020

2. Great Startups Have Been Founded in Most
Decades, but not in Recent Ones…..
◦ 2010s ????
◦ 2000s Facebook
◦ 1990s: Amazon, Google, Netflix, Salesforce, Nvidia, Ebay, Yahoo, PayPal,
Booking.com
◦ 1980s: Cisco, Adobe, Dell, Qualcomm, Gilead Sciences, Amgen, Celgene,
Sun Microsystems, Compaq
◦ 1970s: Microsoft, Apple, Oracle, Genentech, Home Depot, EMC, 3com:
also Micron, Federal Express, LSI Logic, VLSI Tech, Western Digital, Seagate
◦ 1960s: Intel, AMD, Data General, Comcast
◦ 1950s: National Semiconductor, Fairchild, Wang, DEC, Analog Devices

3. Many Reached Top 100 for Market Capitalization
◦ 2010: Still far away (see later slides)
◦ 2000s: Facebook
◦ 1990s: Amazon, Google, Netflix, Salesforce, Nvidia, Ebay, Yahoo,
PayPal
◦ 1980s: Cisco, Adobe, Dell, Qualcomm, Gilead Sciences, Amgen,
Celgene, Sun Microsystems, Compaq
◦ 1970s: Microsoft, Apple, Oracle, Genentech, Home Depot, EMC
◦ 1960s: Intel, Comcast

4. Year to Make Top 100 for Market Cap
◦ 2000s: Facebook (11)
◦ 1990s: Yahoo (5), Google (8), Ebay (10), Amazon (16), Salesforce (19),
Netflix (21), PayPal (21), Nvidia (24)
◦ 1980s: Cisco (11), Dell (13), Compaq (13), Sun Microsystems (15),
Qualcomm (14), Amgen (19), Gilead Sciences (21), Celgene (28),
Adobe (35),
◦ 1970s: Microsoft (11), Home Depot (17), EMC (17), Oracle (19),
Genentech (27), Apple (28)
◦ Summary: <10 (2), >10 and < 15 (7), >15 and <20 (7), >20 (8)

5. Most of these Startups Created Huge Value for
Customers, Investors and Employees From Beginning
◦ Of 24 founded since 1970,
◦ 12 had profits before 5 years
◦ 10 had profits before 10 years
◦ Biotech startups are exceptions
◦ Gilead Sciences and Celgene weren’t profitable until 15 and 17
years respectively
◦ Biotech startups often take longer to get products approved and
thus to become profitable than do non-biotech startups
◦ But things have changed…..with most startups losing money
Profits Came
Very Fast!!!!

6. Early Profits No Longer
Common at IPO Time
◦ Percent profitable fell from
80% to 20%
◦ Despite median age (founding
to IPO) almost doubled
◦ But not anymore: Uber and
Tesla have record losses, much
higher than even Amazon
https://www.businessinsider.com/uber-lyft-ipo-trends-
money-losing-unicorns-could-cause-stock-market-issues-

7. Lack of VC Funding Isn’t Problem
◦ VC funding recovered a few years
after dotcom bubble burst
◦ Began to grow in 2010 reaching
record 5-year high (2015 – 2019)
◦ Many new Googles and Amazons
should have already succeeded
◦ Uber? $70 Billion Valuation with
expected IPO of $120 Billion as of
early 2019 , but huge losses
◦ Tesla? Market Cap briefly exceeded
$150 billion, but huge losses

8. Amazon had profits by Year
10, neither Uber nor Tesla
did. Amazon’s cumulative
losses didn’t reach $3B
while Uber’s exceeded
$20B and Tesla’s $6B. Latter
two losses still growing
Tesla’s Losses
(Year 11 to 17)
Amazon’s Net Profits
https://qz.com/1196256/it-took-amazon-amzn-14-years-to-make-as-
much-net-profit-as-it-did-in-the-fourth-quarter-of-2017/
https://promarket.org/the-uber-bubble-why-is-a-
company-that-lost-20-billion-claimed-to-be-successful/
https://www.statista.com/
statistics/272130/net-loss-
of-tesla/

9. Let’s try a different approach
◦ There must be some great startups among those created
in the last 10 to 20 years
◦ Consider Unicorns, startups valued at more than $1
Billion before doing IPOs
◦ Use the WSJ’s Billion Dollar Startup Club
◦ Many of them were founded before 2010, only some after
2010

10. What Happened to the Unicorns?
◦ Did IPOs (45)
◦ Acquired (19): TaskRabbit, Proteus, Digital Health, Stemcentrix, MuleSoft, Jasper, AppNexus,
AppDynamics, SimpliVity, HortonWorks, Datto, Living Social, Credit Karma, Legendary
Entertainment, Beats Electronics, Nest Labs, Jet.com, Gilt Groupe, Kabam
◦ Still Private (68): Doordash, Postmates, Waitr, Instacart, Lime, Bird, Airbnb, HomeAway,
BrightHealth, CloverHealth, OscarHealth, WeWork, Intarcia Therapeutics, GitHub, Actifio, Zenefits,
Context Logic, Inside Sales, Palantir, Tanium, Deem, Sprinklr, Automattic, NextDoor, EverNote,
Lookout, Qualtrics, Sprout Social, Opportun, Social Finance, Prosper Marketplace, Stripe, Magic
Leap, Fanatics, Infinidat, Houzz, SpaceX, TechStyle Fashion Group, Honest Co., Warby Parker, Zulily,
BrewDog, Unity Technologies, UI Path, Compass, OneWeb, Uptake, AppLovin, Automation
Everywhere, Afinity, C3 IoT, AvidXchange, Rubrik, Thumbtack, Zeta Global, AppDirect, Docker, Age
of Learning, Cyberreason, Symphony, Procore, Udacity, Vox, Draft Kings, Katerra, Zoox
◦ Bankrupt (8): Munchery, Theranos, MuSigma, Good Technology, Jawbone, Fisker Automotive,
Mode Media, Tango

11. What Happened to Unicorns That Did IPOs?
◦ Have Unicorn share prices gone up or down (as of March 9,
2020)?
◦ More recent data would show smaller price increases or
greater price decreases, due to market collapse
◦ Uber and Lyft dropped by 50% between March 9 and March 18
◦ If Unicorn share prices have gone up, did they go up further
than did the Nasdaq?
◦ 45 startups shown on three slides, presented in declining
order

12. Startup Year Founded Share Price Nasdaq Market Cap $B
Okta 2009 +351% +24% 13
Square 2009 +316% +41% 23.3
Mongo DB 2007 +264% + 9% 6.3
Twilio 2008 +198% +46% 10.9
Roku 2002 +197% + 4% 9.5
Coupa 2006 +153% +48% 7.4
Zoom 2011 +77% - 10% 30.2
DocuSign 2003 +73% +19% 12.3
Etsy 2005 +61% +46% 5.2
Zscaler 2008 +19.7% - 3.6% 5.1
Moderna 2010 +19.3% + 3.3% 8.2
Sunrun 2007 +16% +43% 1.4
Forescout 2000 +16% + 7.5% 1.5
New Relic 2008 +14% +48% 2.3
Beyond Meat 2009 +11% - 10% 4.6
All 15 have
share
price
increases,
But 2 are
smaller
than
Nasdaq
rises

13. Startup Year Founded Share
Price
Nasdaq Market
Cap $B
Cloudflare 2009 +6.7% - 12% 5.8
Wayfair 2002 +1.5% +48% 3.1
Lending Club 2006 -10% +48% 0.76
Sprout Social 2010 -13% - 17% 0.3
Nant Health 2010 -16.4% +47% 0.17
Opportun 2005 -19% - 9,3% 0.36
Grub Hub 2004 -20% +48% 3.2
Peloton 2012 -24% - 10% 5.5
Pure Storage 2009 -30% +49% 3.0
Lyft 2012 -35% - 8% 7.3
Quotient Technology 1998 -36% +48% 0.63
Crowdstrike 2011 -35% - 7% 8.0
Livongo 2008 -37% - 12% 2.3
Box 2005 -40% +48% 1.6
Slack 2009 -42% - 10% 11.8
Most of
These 15
Have Big
Share
Price
Declines

14. Startup Year Founded Share Price Nasdaq Market Cap $B
Plural Insight 2004 -42% - 2% 1.7
Pinterest 2009 -45% - 10% 7.6
Dropbox 2007 -45% + 3% 6.6
Uber 2010 -46% - 9% 38.9
Medallia 2001 -48% - 6% 2.4
Domo 2010 -57% - 4% 0.32
Cloudera 2008 -61% +19% 2.0
Snapchat 2011 -61% +23% 14
Casper 2014 -62% - 25% 0.2
Nutanix 2009 -64% +36% 2.6
Bloom Energy 2001 -71% - 7% 0.76
Green Sky 2006 -79% - 3% 0.93
Eventbrite 2006 -77% - 10% 0.7
GoPro 2002 -93% +48% 0.42
Blue Apron 2012 -98.5% +17% 0.035
Most of
These
15 Have
Huge
Share Price
Declines.
Will They
Go
Bankrupt
or Be
Acquired?

15. Which Startups are Doing the Best?
◦ 14 Startups have Share Price Rises Greater than Nasdaq Rises
◦ Okta, Square, , Mongo DB, Twilio, Roku, Coupa, Zoom, DocuSign, Etsy,
Zscaler, Moderna, Forescout, Beyond Meat, Cloudflare
◦ But only three are profitable (EBITDA)
◦ Square, Zoom, Etsy
◦ And only five have market capitalizations over $10 Billion
◦ > $30B: Zoom
◦ $20 to $30B: Square
◦ $10 to $20B: Twilio, DocuSign, Okta
◦ Only one of them was founded since 2010……
◦ Will some of these be the next Amazon, Google, or Facebook?
100th top market cap
company in 2019
had $98B Market Cap

16. Very Small Market Capitalizations
◦Only 5 of 14 have higher than $10 B and 1 greater than
$30B as of March 9, 2020
◦Long way to go before they reach top 100
◦ 100th Top Company had $98 Billion Market Cap in 2019
◦Yet they have reached age at which some should be in
Top 100, or at least close
◦ 13 of 14 founded more than 10 years ago
◦ In past decades 9 startups reached top 100 before year 10
and 16 before year 15

17. Only Three of 14 had profits in 2019 (EBITA)
Startup
Profits/Losses Revenues Fraction
2019 2018 2019 2018 2019 2018
Etsy 153 104 818 614 0.19 0.17
Square 229 122 4700 3300 0.048 0.033
Zoom 25 7.6 623 331 0.040 0.022
Beyond Meat -1.3 -24 298 88 -0.004 -0.27
Roku -60 -9 1100 743 -0.05 -0.01
Coupa -36 -33 390 260 -0.09 -0.13
DocuSign -124 -379 974 701 -0.12 -0.54
Zscaler -24 -26 303 193 -0.13 -0.079
Twilio -236 -182 1100 650 -0.21 -0.13
Cloudflare -74 -66 287 193 -0.25 -0.34
Forescout -87 -63 337 298 -0.26 -0.21
Okta -165 -102 586 399 -0.28 -0.26
Mongo DB -176 -99 422 267 -0.41 -0.37
Moderna -477 -388 60 135 -8.0 -2.9
Source: Yahoo Finance, EBITDA, March 22, 2020

18. Who Has Best Chance of Becoming Next Google or Amazon?
◦ Zoom?
◦ Will video communication become huge, as airline travel declines
due to concerns about viruses and climate change?
◦ Square?
◦ Will payments have the biggest impact on business?
◦ Twilio, DocuSign, Okta?
◦ Or will a cloud platform, electronic agreement, or authentication
supplier have the biggest impact? Of which none have profits
◦ What about privately-held startups that have not yet done IPOs?
◦ WeWork, Juul, Stripe, Airbnb, SpaceX, Palantir have >$10B in
valuations, but are all losing money
◦ Plant-based meat or AI startups?

19. Disappointing
◦ None of these companies can compare to those listed on
the second slide
◦ Only one was founded after 2010 (Zoom in 2011)
◦ So the next Google or Amazon is supposed to come from a
group of startups founded 10 to 20 years ago that still
haven’t made a big name for themselves? (or profits)

20. Many Unintended Consequences
◦ Losses force companies to reduce wages and benefits because
that is their only path to profitability
◦ This didn’t happen in past decades
◦ Startups listed on second slide created huge amounts of value
for employees, not just investors,
◦ because they commercialized technologies with productivity
advantages
◦ productivity advantages enabled them to pay high wages to
engineers, scientists, factory and maintenance workers
◦ Today’s startups are creating part-time jobs, ones without
proper benefits

21. Bottom Line
◦ Successful startups aren’t being founded to the extent
they were founded 20 to 50 years ago
◦ Something is very wrong with America’s venture capital
and innovation systems
◦ And hype is blocking out any intelligent discussion of
possible reasons and solutions https://issues.org/behind-
technological-hype/

22. ◦Appendix

23. ◦ https://www.value.today/world/world-top-500-companies
◦ https://www.nvidia.com/object/IO_20010618_6259.html nvidia profits by 1999, 6 years after 1993
◦ https://investors.ebayinc.com/investor-news/press-release-details/2001/EBay-Inc-Announces-
Fourth-Quarter-and-Year-End-2000-Financial-Results/default.aspx ebay profits by 1999, 4 years
after founding
◦ http://getfilings.com/o0001193125-04-201626.html salesforce profitable in 2003, four years after
founding in 1999
◦ https://www.theguardian.com/business/1999/feb/14/observerbusiness.theobserver4 profits for
Cisco in 1993 or before, 9 years after founding
◦ https://en.wikipedia.org/wiki/Adobe_Inc. adobe profits in first year
◦ http://www.fundinguniverse.com/company-histories/dell-inc-history/ at least by year 6 (1990) for
dell
◦ https://en.wikipedia.org/wiki/Gilead_Sciences first profits in 2002, 15 years after founding
◦ https://www.latimes.com/archives/la-xpm-1991-09-17-fi-2845-story.html qualcomm didn’t have
profits in 1991, 6 years after founding

24. ◦ https://pink.pharmaintelligence.informa.com/PS017363/AMGEN-FIRST-YEAR-EPOGEN-SALES-BOOST-FY-
1990-REVENUES-155-TO-199-MIL amgen reported profits in 1989, 9 years after founding
◦ https://techcrunch.com/2017/08/08/a-look-back-in-ipo-microsoft-the-software-success/ profits every year for
microsoft
◦ https://www.semanticscholar.org/paper/Apple's-Changing-Business-Model%3A-What-Should-the-Do-Lazonick-
Mazzucato/6df79c3389e1d56be776bea613b385650300b197/figure/0 apple profitable from at least 1980, or 4 years
after founding
◦ https://www.encyclopedia.com/social-sciences-and-law/economics-business-and-labor/businesses-and-
occupations/oracle-corp profitable by 1980, 3 years after founding for oracle
◦ https://pink.pharmaintelligence.informa.com/PS009688/GENENTECH-PROTROPIN-SALES-TOP-5-MIL-IN-
1985-FOLLOWING-LATE-OCTOBER-LAUNCH-REVENUES-UP-43-TO-26-MIL-I profits by at least 1984, 8 years
after founding in 1976
◦ https://ddd.uab.cat/pub/infanu/46829/iaHOMEDEPOTa1985ieng.pdf home depot profits by 1981 or 3 years after
founding
◦ 3com profits achieved at least by 1985 or 6 years after founding in 1979. Computer world, June 30, 1986
◦ Computer associates reported profits in 1984 or 8 years after founding. Computer world Nov 5, 1985.
◦ Yahoo had profits by 1998, or four years after founding https://www.cnet.com/news/yahoo-beats-earnings-
estimates/

25. ◦ Paypal had profits in 2002: https://www.sec.gov/Archives/edgar/data/1103415/000091205702023923/a2082068zs-
1.htm
◦ Netflix year 5 https://www.statista.com/chart/12646/netflix-annual-profit-loss/
◦ Google year 3 or 5 https://techcrunch.com/2017/07/31/a-look-back-in-ipo-google-the-profit-machine/
◦ Amazon 6 to 10
◦ Intel, Why business leader fail to look to look facts in the face: year 3 profits
◦ Qualcomm was profitablein year 10. Network world, 24 April 2000
◦ Data general was profitable in 1972 Computer World,Nov 15, 1972 4th year from founding
◦ https://www.referenceforbusiness.com/history2/64/Sun-Microsystems-Inc.html sun was profitable within 6
months of incorporation
◦ https://www.latimes.com/archives/la-xpm-1988-02-02-fi-40143-story.htmlCompaq had profits by year 4
In the 1990s, Celgene formed the nonprofit organization Clean Sites, Inc. ... Celgene posted its first profit in 2003, which has largely contributed to the use of .
Celgene posted its first profit in 2003, which has largely contributed to the use of
.

28. https://www.statista.com/chart/12646/netflix-annual-profit-loss/
Founded 1997