HN Explorer

Ask HN: Am I too cynical for my own good? (question about unicorns)

7 points by ID1452319 ↗ HN
How does a start-up, in a mature market, with no discernible tech advantage and very few customers command a billion pound valuation?

For example this week Marshmellow, which is an "insurtech", raised $85 million valuing the company at $1.25 billion.

This is interesting as in Britain (where third party car insurance is a legal requirement), online car insurance isn't new. I've managed our families car insurance online for at least a decade.

We have several big players Admiral, AXA, Direct Line who seem to offer a similar service, regularly innovate products and have millions of policies, compared to Marshmellows 100k.

Mashmellow's press release makes vague claims about "using a wider set of data points and clever algorithms" which surely any half-decent VC can see right through?

I routinely read about these valuations and shrug my shoulder and ask "why?". Am I too cynical? Should I just shut up, create my own company with a bunch of meaningless buzzwords and become a billionaire founder myself?

7 comments

[ 3.8 ms ] story [ 28.3 ms ] thread
NetOpWibby
No / Yes

You’ve asked a lot of questions, choose your answer advice. If you’re willing to put in the work, go and create your vapor empire.

ID1452319
Sorry, Friday morning ramblings!
NetOpWibby
No worries, my 5-year-old woke me up at 4am so why not check out /new?

Regarding ridiculous valuations, an online friend who has experienced the dotcom boom IRL said he's seeing the same things again. Why not take advantage of these VCs?

jimmyvalmer
“If the people believe there’s an imaginary river out there, you don’t tell them there’s no river there. You build an imaginary bridge over the imaginary river.” -- Nikita Khrushchev
yuppie_scum
Your salary is real. Your equity is real(ish). I’ll leave it up to you to decide if the company is evil or now.
ID1452319
Mark Twain wrote a short story called The Million Pound Bank Note. In it, a shipwrecked sailor is given a bank note worth one million pounds as part of a bet between two rich and eccentric brothers (not Trading Places). The sailor finds that whenever he tries to use the note to buy something, people treat him like a king and let him have whatever he likes for free.

I'd imagine being the founder of a unicorn offers similar perks and opens doors, regardless of how "real" the value is.

yann2
Dont be cynical. Do the math.

It usually boils down to some simple scaling formula. So work it out.

They say they are targeting expats (pulling driving data from multiple national dbs) which seems to be their differentiator from incumbents.

Say 5 coders + 10 sales guys acquire 1000 customers in 6 months costing 1 Mil.

So what can you pull off with 5 mil, then 20 mil, then 80 mil...