“The Unicorn Is Attacked”, 1494–1505, Metropolitan Museum of Art.

What has unicorn hunting done to us?

I worry that Silicon Valley has become a cult of fundraising. Maybe we need to get back to the cult of just building a great business.

Bret Waters
5 min readMar 24, 2022


I was enjoying a glass of wine recently with my friend, David. We’ve both been in the Silicon Valley startup world for our entire careers — he ended up hiking the Venture Capital trail while I stayed on the entrepreneur path, but we were both hunting unicorns (billion dollar companies). Yet here we were, with a delicious bottle of Rafanelli Zinfandel, talking about Mittelstand, the German term describing companies that are decidedly non-unicorn but are the rock-solid foundation of any economy. They are small-to-medium in size, privately owned, care about the well-being of their employees, have strong local linkages, and use conservative long-term financing. So pretty much the exact opposite of the Silicon Valley ethos of “burnout or bust in the pursuit of billions”.

David and I have both come to the conclusion that the mindless pursuit of unicorns and venture capital has not always been a good thing. Honestly, I’m starting to feel as if the Silicon Valley startup world has devolved into a cult of fundraising. Young entrepreneurs obsess about what they think investors will like instead of what customers will like. Success is measured by VC valuations instead of fundamental economics (see the WeWork debacle).

Popular culture is partly to blame, of course. Shark Tank on TV, movies about Mark Zuckerberg, tasty tweets from Elon Musk. All this has led many young people to sit around dreaming of someday meeting a Venture Capitalist and then their life will be wonderful. And yet Venture Capital only really makes sense for a fairly small percentage of new companies. Let’s say you have a startup that looks like it could be a nice, profitable $25M/year business — sounds good, right? And yet there is not a single venture capitalist on Sand Hill Road who would invest in a company that “only” has the potential to get to $25M/year. It’s just not big enough to fit their model.

Their model is to fund ten rocket ships, watch eight of them crash, and reap billions from the two that succeed. It’s a model that can work spectacularly well for for the VC’s, but it kinda sucks for the eight entrepreneurs whose rockets crashed.

It also sucks for all the employees who ended up being collateral damage because they were on a rocket ship that only had a 20% chance of success.

Meanwhile, the investment returns that VC funds have delivered in recent years have attracted an enormous pile of capital to that end of the market, often at the expense of capital available for mid-market financing¹. The World Bank calls this the missing middle — the fact that there’s venture capital financing available to potential unicorns, and there’s local bank financing available for shops and restaurants, but there’s a shortage of financing available to the rock-solid companies right smack in the middle of the bell curve.

It was partly because of this that fifteen years ago I got involved with Miller Center for Social Entrepreneurship. I was interested in how this missing middle can be addressed, especially as it relates to Social Ventures which weren’t “non-profit enough” for foundation grants and yet weren’t “for-profit enough” for venture capital. They were neither fish nor fowl, with no financing sources designed for them. Today, I’m pleased to say that particular landscape is much different, as impact funds have proliferated and impact capital has become a legitimate asset class².

All of this now leads us to Zebras. In 2017, an essay appeared on Medium called “Zebras Fix What Unicorns Break”. In some respects, it’s a manifesto for the kind of social ventures that we have developed at Miller Center — hybrid organizations that break out of the non-profit/for-profit false dichotomy and prove that companies can be run for both economic profit and social good. But it goes a step beyond that, suggesting that Zebras “come in many different stripes, representing the diversity of their founders and the problems they are solving; are collaborative and feisty as they build businesses that are better for the world; and do so while taking care of their workforce, their communities, and their environment”. The authors of the essay went on to found Zebras Unite, a cooperative of startup founders who believe in these values.

Here’s the bottom line for me: Run the kind of company you want to run, whether that’s a Unicorn, a Zebra, or solidly Mittelstand. Finance it with sources and structures of capital that are well-aligned with your goals. Venture Capital is great for the next Airbnb or Uber: companies that need to grow at at a risky, unnatural velocity in order to get to billions in value. That’s what venture capital is made for. But for the other 99% of us, we are much better off looking at other ways to finance our startups. The good news, as I’ve written before, is that in 2022 there are many great ways to finance a new venture, including financing structures such as revenue share and shared earnings agreement. The best option, of course, remains to build a business the old-fashioned way: by bootstrapping it. It has always been thus.

Yes, we can still celebrate Steve Jobs, Elon Musk, and all the beautiful unicorns they have inspired. But let’s also celebrate the hard-working entrepreneurs who just go out and build solid mid-sized companies that solve real problems and make customers happy. Let’s continue to create sources and structures of capital that make sense for them. Let’s help them escape the cult of fundraising and get back to the cult of just building a solid business. Those entrepreneurs may never get have the valuation of their last VC round featured in TechCrunch or The Information, and they may never get to ring the opening bell at the NYSE, but they remain the backbone of economies all over the world.

This essay was adapted from an earlier edition of my newsletter for entrepreneurs and innovators.

  1. Just to give you a flavor of how many capital has flowed into VC funds, in the five years from 2016–2021, venture capital assets under management tripled from $574B to $1.7T.
  2. By many accounts, impact capital available grew 10x over the years from 2010 to 2020.



Bret Waters

Silicon Valley guy. I teach entrepreneurship at Stanford, run the 4thly Accelerator, and mentor startups at Miller Center for Social Entrepreneurship.

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