Sunday Morning Tech Buzz 10/25: Why some Unicorns are in trouble; SevOne celebrates 10 yrs; IMPACT 2015 Capital Conference November 3rd & 4th

Tom Paine

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(Where I somehow try to answer questions I haven't been able to answer the rest of the week, at a time when I'm least capable of doing so. And sometimes don't finish on time. This week, my excuse is that I made a rare visit to church.)

Also on the First Round Capital front, Uber, which on paper is worth alot to FRC, is said to be talking about raising another $1 billion, possibly pushing its valuation near $70 billion. These reports about Uber, when appearing in the "responsible press", usually turn out to be accurate and often conservative.

Meanwhile, an NYU professor and well-known expert on valuations thinks Uber is only worth about $23.4 billion, approximately. And Fortune looks at the private
company valuation game
and why there are so many unicorns now.

The problems with some unicorns is that they are built upon a pile of assumptions,
one stacked on top of another, that can collapse like a house of cards. Its too early to say, but there's a chance that DraftKings and FanDuel may have suffered irreperable damage from the alleged insider dealing scandal at DraftKings, Even if every one is cleared of wrongdoing, it still puts the spotlight on them and its unclear whether states and the federal government will continue to find their games legitimate. The US Attorney for Southern New York subpoenad DraftKings this week, reportedly asking for information about an employee’s activities and potential misuse of inside data.

I don't understand the science behind the Theranos situation as well, but that company's been valued at $9 billion, so there's a lot at stake.

Another unicorn, restaurant search engine Zomato, laid off 300 out off some 3,000 employees globally, the primary targets being people who collect content about restaurants. Philly reported that it ditched Philly entirely, shutting down its 15 person office, consisting of mostly content collectors.

TechCrunch reported that Zomato has raised over $223 million in funding, and in April the company disclosed its $1 billion valuation.

And that's how bubbles get started. Some people have a great deal of money to invest and their hurdle rates (expected returns) are low because interest rate are so historically low. Irrational assumptions, questionable due diligence, and failure to consider possible risk scenarios compound the problem. I'm not really crying for those investors who get burned on some of these deals.

But I won't call it a bubble now because I haven't seen enough blood in the street, as some people say. There have been rounds of layoffs at several area banks and FMC is cutting 800 + employees (some locally), as examples, but I haven't seen it hit much in Philly's tech sector.

SevOne held its first User Conference last week at UDel, though it was fairly small because its customer base is still a concentrated group of large customers and it was closed to the public. And it was fairly quiet, with not a great deal of information coming out of it, probably by design. But it certainly attracted considerable attention. My post on the user conference received amazing traffic on Twitter, though I suspect much of it were from bots set to respond to any mention of SevOne, paticularly after my post was retweeted by SevOne.

But its an exciting time for SevOne, which may or may not have attained unicorn status by now. In terms of dynamic, scalable monitoring of large network performance (and it handles some huge ones) SevOne appears to be ahead of the pack at the moment. And the market for large network management tools is exploding, with the emergence of mobile devices, Internet of Things applications, and the sheer number of devices now in use. SevOne will face big decisions in the next year or two: whether to go public, acquire or be acquired, and how broad its product line should be (right now its rather narrow). As well as tactical decisions about how to manage the products it has.

SevOne also used the occasion to celebrate its tenth anniversary of its founding, holding it at the University of Delaware where the Bakalovs started it. And part of the event was held in its future Delaware head offices at the Star complex on campus.

But one other firm that deserves much credit for SevOne's success was quiet; Osage Venture Partners, a fairly small VC at the time, had the vision to get in early. Osage is still in SevOne because it participated in its latest round; I don't know whether it got anything out at the time of Bain's investment snd partial recap.

Just a reminder, and I'll have more info next week, that the IMPACT 2015 Capital Conference, one of PACT's most important annual events, is right around the corner, to be held on November 3rd & 4th at the Ritz-Carleton Philadelphia.