
LivingSocial Offers a Cautionary Tale to Today’s Unicorns - mikek
http://mobile.nytimes.com/2015/11/22/technology/livingsocial-once-a-unicorn-is-losing-its-magic.html
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hitekker
> Today, LivingSocial is more unicorpse than unicorn.

I like the ring of "unicorpse", hopefully it becomes out go-to word to
describe the upcoming batch of startup failures.

~~~
jacquesm
Why do you like it? Do you enjoy the misery of others?

Start-ups fail, they did so in the past, they will do so in the future and
giving those failures cutesy names to make fun of them is a pretty nasty thing
to do. Behind every start-up that fails (ok, almost every) are people working
their asses off to try to make a success and in some (again, not all) cases to
make a difference.

The number of things they have to get right is pretty vast and all it takes is
for one of those 'and' gates not to fire or to fire at the wrong moment and
all that work was for nothing.

Most start-ups are pretty realistic about their chances of success and to
exhibit glee at the prospect of failure of others is a negative trait.
Suggestion: instead of standing by the wayside and making fun of those that
try, try it yourself, give your best idea your best shot and see how that
works out. And if you fail, I'll give you props for trying anyway.

~~~
asanwal
I appreciate this sentiment but if companies want to be regarded as unicorns
when things are going well, it seems fair to give them a cute'sy but
ridiculous name, unicorpse, when they're on their way down.

Many startups actively seek out the unicorn label as it helps them with
getting press, recruiting employees, etc. Being a unicorn is shorthand to
folks that this company might be big and successful. Unicorpse is shorthand
for this company is dying. That seems fair.

~~~
hsod
> Many startups actively seek out the unicorn label

Such as?

~~~
duncanawoods
Possibly all of them given its arguably a rational thing to do. If you look at
a list of unicorns, you will see a huge glut of them are valued at precisely
1B.

People say that this is not chance that so many different businesses happen to
be worth the same but that they have accepted punitive terms to stretch their
valuation to 1B because the press advantages are worth the cost. This effect
will also have applied to all the companies now valued above 1B because they
played the same game when they were <1B and "reached" to get the label.

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dcpdx
> “We literally bet the company and went through 12 months of runway in a
> couple of months because we thought that the time to own the market was
> right.”

This makes no sense. The switching costs for both consumers and businesses is
basically zero, and there are aren't really any network effects like there are
with Facebook, Twitter, etc. What did they expect to happen at the end of
those 2 months? That consumers would ignore the hundreds of other deal players
in the market and only buy from LivingSocial?

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GVIrish
It's been interesting to watch the rise, peak, and fall of this irrational
frenzy behind companies that have a terrible business model or no business
model at all.

It seems like the investment community is finally learning that yes you can
get millions of people excited about something that is free or heavily
discounted to the point of losing money but actually making money that way is
extremely difficult. How many billions in financial and years of human capital
have been burned learning this lesson?

The rise and fall of Groupon, LivingSocial and others just makes me wonder how
much damage was done to small businesses in the process.

~~~
ffn
If by small business you mean get-rich-quick schemes to con greedy / desperate
investors, then tremendous damage has been done. If by small business, you
mean a small group of individuals (or just one person) who have an idea and
several free weekends / week-nights to implement that idea into a product then
put it in front of potential users via sites like HN (if some sort of
developer-centric product) or on a market-place like amazon or Taobao (if some
sort of real product), then none at all.

The monetary cost of delivering most new products to users is pretty much at
most $100 (the time cost hasn't changed though; it still takes forever to get
really good at doing something). Which means, for the majority of small
businesses, millions of investors dollars is next to useless to the expert
owner when he or she can bootstrap him/herself to profitability without them.
Sure, it might take 2 or 3 years longer, but the small business owner is also
under no sleep-depriving pressure to go fast, and when one's runway is
effectively infinite, one doesn't run out of it.

So to the DIY owner with plenty of professional skill, discipline, and
patience, investor money (and the associated risk and burnout) just isn't
attractive. Which leaves the venture investment field largely populated by
impatient hot-shots peddling get-rich-quick schemes. And, having been burned
time and time again, perhaps these investors would have learned by now.

~~~
mlucero
I think he was referring to the small businesses that actually used services
like Groupon and LivingSocial to sell their products.

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freshyill
I ran into a former coworker from LivingSocial last week. We talked about how
they had quite an impressive stable of Ruby developers a few years ago. Many
have left, but there's still several who have been there for four or five
years. I can't see why so many great developers are still there. Comfort in
the knowledge that they could get get another job in a heartbeat if they
needed to?

~~~
taf2
Because they pay really well and the job is fun. I remember loving my job at
living social. Work does not always need to be about some greater mission.
Only reason I left is my startup - is doing rather well

~~~
freshyill
No doubt the work is challenging and the environment is fun. I'm just
surprised the company's financial situation doesn't cause them to leave.

~~~
potatolicious
People's motivations for staying at a company are pretty varied.

That said, without attempting to ascribe anything to the people at
LivingSocial, one thing I _have_ noticed is that a large number - if not most
- talented devs are also really shit at interviewing and negotiation.

Myself and some others I know enjoy interviewing and are at least half-okay at
negotiation, so we're very confident on the job market. I have met many
developers who can code circles around me for whom interviewing carries a lot
of dread, and they won't do it unless they feel they _really_ need to.

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WildUtah
Everybody in the startup community could explain why LivingSocial was doomed
from the start five years ago. It's only the East Coast naifs investing great
wealth of other people's money that are in any way astonished.

I wouldn't consider that a cautionary tale for anyone but easily conned New
York investors.

~~~
brainflake
I sense some bias in your comment, I just can't put my finger on it...

~~~
kasey_junk
I love the idea that it is the New Yorkers who are financially naive. Like
what kind of upside down narrative is that?

"Ha Ha let's go fleece some of those hayseeds from NYC. Rubes & their money
are soon parted when they start playing with the big boys!"

~~~
rajacombinator
Yes but in startup investing it really is true - east coast people just don't
get it.

~~~
kasey_junk
Hmm, what about the living social story implies that? I for one came out of
the square IPO thinking "why do those bay area companies keep getting fleeced
by I banks?"

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mistralx01
The founders and early execs of Living Social did very well! All of them
walked away with millions.

~~~
ChuckMcM
Curious if you _know_ that or just think that? They did 10 rounds of funding
according to CrunchBase and at first glance I did not see any where the
founders took money off the table for themselves.

~~~
mistralx01
Look through AngeLlist and few other places on the interwebs. Do some
sleuthing....

~~~
jacquesm
You're the person making the claim, that means you already know where the
evidence is, and assuming that is true a polite request for sharing that
evidence should not be answered with 'do your own homework' on the off-chance
that you don't actually have such evidence. So, if you have any evidence it
would be much appreciated if you produced it.

As a rule, especially with deals like these the founders do not get to take
money off the table until the company has achieved certain benchmarks so I'm
as curious as the GGP is.

~~~
ChuckMcM
I don't think they really know. The list of all LivingSocial filings is here:
[http://www.sec.gov/cgi-bin/browse-
edgar?company=LivingSocial...](http://www.sec.gov/cgi-bin/browse-
edgar?company=LivingSocial&owner=exclude&action=getcompany) and the $400M
raise filing is here:
[http://www.sec.gov/Archives/edgar/data/1439606/0001439606110...](http://www.sec.gov/Archives/edgar/data/1439606/000143960611000002/xslFormDX01/primary_doc.xml)
which includes a note that $200M went to "others". But nobody seems to know
definitively if those "others" included the founders or if it was just earlier
investors cashing out. Given that the egregious cash out by GroupOn's founders
had recently occurred I would be surprised if LivingSocial's investors would
agree to paying off the founders but stranger things could happen.

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rajacombinator
Didn't read, nothing to caution. LivingSocial (puke) was always a straight up
cash grab, I'm sure the founders did very well.

