Stop Dreaming About Becoming a Unicorn Before Actually Becoming One
Some people love daydreaming a lot..
We are living in a world where we encounter many stories about young people becoming billionaires in their early 20s. We see some startups reaching unicorn status (exceeding a valuation of $1 billion) or simply exiting with substantial cash returns..
The press loves to share these extraordinary stories with society and pour some hope onto them. At the end of the day, the common is not very interesting, but the rare is. Just like murder cases are shown in the news much more often than heart attack cases, even though heart attacks are a much more common cause of death than murders.
So, after seeing many success stories but not a single failure story, some people start dreaming of having a unicorn business, maybe even before selling a single product to any customer.
Sounds interesting, right?
Well, imagine that you have a soilless agriculture business in Istanbul. Soilless agriculture is also known as urban agriculture since you don’t need large size of field and can conduct this business right near the city center. This is advantageous in many ways, especially in cutting logistic costs while carrying the products to the end-customer.
This seems to be a profitable business and many people/companies are after it. It doesn’t require a high-level tech and it is easy to replicate.
Now imagine that you’ve started dreaming of becoming a unicorn after signing deals with many restaurants in Istanbul. Let’s analyze this..
First, I’ve already mentioned that this business is easy to replicate. No new discovery. Companies or rich business owners may invest in larger fields close to city center, hire necessary labour and technical equipment. They can easily compete with you.
Secondly, if you want to expand your business in other cities, you have to be close to the city centers to deliver your agricultural products in the cheapest way possible in order to compete in price as well. So, you are not conducting a digital business where customers around the world can pay you instantly no matter where they are. You can’t sell your agricultural product to Australia whereas an online platform can sell monthly subscriptions to all over the world! So, this means your business’ total addressable market is very limited.
Finally, let’s make a vague calculation to be valued just as a unicorn. If you want your valuation to be $1B, using the 10x multiple logic, your annual revenue must be around $100M.
Now the question is, can you generate $100M per year by just selling agricultural products ( i.e. lettuce is not very expensive, right?), in Turkish Lira, and just to some of the restaurants in Istanbul?
Well, anything can happen in business. But I personally wouldn’t prefer to dream of becoming a unicorn yet..
