We are at peak tech unicorn, the term coined for the formerly-rare tech company that is valued at more than $1 billion.
The problem is, are they really that unusual anymore? “I can understand why it was coined, unicorns are really rare, but now we have 150 so they’re not really rare, so we have a herd of unicorns,” says Tony Greenham from the RSA [Royal Society of Arts].
Greenham follows up with a rhetorical question: “Who knows what the collective noun for a unicorn is? A blessing. What I want to ask is if it’s a blessing or curse?”
Tech companies are now being valued higher and faster than any other company before, and with this comes power and influence. The question being asked last week at Google Campus is if these tech unicorns can keep their feet on the ground and be a force for good.
On the one hand you have tech companies shouting about how good they are to their employees; how they are saving the environment by reducing waste and consumption and how their CEOs are pledging more and more money towards philanthropic causes. On the other they are accused of mistreating employees, driving up car usage thus damaging the environment and setting up charitable funds for tax breaks as part of their efforts to pay as little tax as possible.
The panel understandably never got to the heart of the very complex question being asked: 'Will tech unicorns save our planet?' What they did do is shine a light on some of the ways large tech companies can improve the world, and how the system around them needs to change if they are to be rewarded for doing good rather than relentlessly building to scale.
Is the funding model broken?
Alex Depledge (below), former startup founder (Hassle.com) and now chair of Coadec and Sharing Economy UK, believes that startups start out with good intentions: “We are very mission led now. Any good startup in London will be able to tell you a story. It’s a story not just about growing their business but empowering their people and creating a working environment that people want to get up and go to.”
Tony Greenham of the RSA thinks that despite many tech companies starting out hoping to help people in their daily lives and build a sustainable company, “when the prospect of becoming a billionaire is dangled in front of you, and the venture capitalists need their return, I’m afraid that mission has faded into the background by then.”
Depledge agrees there is a systemic problem when it comes to the ugly requirement of raising capital: “We got ourselves in a bit of a state from 2011 onwards in that we believed that the only way to build a company was to take institutional money from investors. We bought into this premise that if you weren’t first to market, you lost.”
The solution? “Making sure it’s not the CEO becoming the puppet of the capitalist funding them, or in the rush for an exit or IPO. We go back to first principles and we build solid businesses and that is how we avoid the unicorn bubble we are in right now.”
The sharing economy is the case in point. On the one hand these companies are changing the way we travel, opening up competition in the hospitality and transport sectors and driving more efficient use of resources by sharing them. On the other hand they are making consumption easier than ever.
For starters Depledge wants to clear up the way we use the term “sharing” when it comes to digital businesses. She says: “I think we need to really understand what the sharing economy is because I think it has got itself a bit of a bad name. By using an altruistic term like sharing to embody what a lot of people see as commercial enterprises.”
So is the sharing economy helping the planet, or is it helping the companies make shedloads of cash?
“What’s really important is getting to a more data driven assessment,” says Depledge, “rather than a more emotive, gut assessment. What we are finding is that Airbnb is not taking away business from hotels in the way we thought it had.
Depledge spoke about figures from The Economist that show only 0.5 percent of Londoners list their property on Airbnb, "and when you look at where people are renting, they’re not renting in the centre of London they are renting in the suburbs. So what you are seeing is the forging of a new market where people are exploring under-used assets. That can only be a good thing. If people don’t have to buy a car, or a power tool, then it ultimately means we won’t be using as much of the planet’s resources.”
Greenham doesn’t quite see it the same way: “Economists have long observed a rebound effect. So the more efficient you get at producing something people will then consume more. So are people travelling more now because of Airbnb? Are people getting off buses and into taxis because of Uber?”
Supplier rights over consumer rights
Where Depledge is really passionate is about making things better for suppliers, the social impact of the sharing economy. Startup founders are always talking about how their product will make your life, the consumer, easier.
However, freed of her role as CEO at Hassle.com Depledge doesn’t have to espouse consumer rights: “I didn’t really care if I made your lives easier because you could get a cleaner, because that is just making your life incrementally better. What I cared about was how much I made a cleaner’s life better.”
“So what we tried to do was move that from the opaqueness into a much more controlled, transparent, safe environment where cleaners got paid more, they could pick and choose their hours, they got to say if they wanted to work for a customer or not rather than an agency and they could fit that around their childcare responsibilities.”
“I think Airbnb are doing a good job of showing how their hosts are contributing to the community and also living the life they have chosen by either supplementing or making their income out of their home that they rent out and to a large extent it’s the same with Uber drivers. They’re not victims, they have a choice and they usually use their feet with which to make that choice. People flocking to Uber is not because there aren’t jobs out there to take it’s because they are choosing to have a flexible working life.”
So, can they save the world?
Greenham sees good progress being made in these areas of sustainability, wellbeing and social impacts, as well as the obvious dangers, but what he is really concerned about is the concentration of power around digital companies.
“This is about power, control, ownership” he says, not naming names because it is written on the front door of the venue.
“Something that worries me about the digital economy business models is that they concentrate wealth and power in one sense, at the same time that they distribute it in another sense. The platforms that provide this are building incredible, almost monopoly power. That doesn’t mean there is only one firm but monopoly power is where you have absolute power over the market and you have to be really responsible with that power.”
This is where we seem to run out of solutions. Despite the fact that these companies are often good to their employees and are driving us to live better connected lives, they also seem to exist above the law, sometimes for good when it comes to protecting what is left of customer privacy, and sometimes bad when it comes to paying tax bills.
Fundamentally, this makes the idea of a truly altruistic tech unicorn a contradiction. In order to be valued at $1bn a tech company must take on a large amount of funding, and with this comes pressure to scale, often at terrific speed, which can muddy a company's vision and affect its environmental impact. This is the curse of the tech unicorn.
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