Gods, Empires & Unicorns

The East India Company, Friendster, Greek Gods & "Big Stack" Companies of the 2020s

Nothing lasts forever - no matter how great and powerful, or how new and fast.

The era of The Big Stack has reached a milestone.

Dozens of private companies nurtured over the past decade are coming public with valuations in the billions. And the expectation is that they’ll continue to grow for years to come…

This is a key theme for “The Big Stack” -- the Cambrian explosion of IPOs of companies with disruptive business models, incubated over the past decade.

Among them will be the next Amazon, Microsoft, Google… they’ll displace today’s leaders, just as their predecessors displaced other older giants.

But this moment of corporate empire building is just the latest in a long history.

The Dutch East India Company, the preeminent commercial enterprise of its time, estimated to have reached nearly 8 TRILLION USD in today’s dollars is just a footnote. https://en.wikipedia.org/wiki/Dutch_East_India_Company

“The Dutch East India Company (Dutch: Vereenigde Oostindische CompagnieVOC) was an early megacorporation founded by a government-directed amalgamation of several rival Dutch trading companies (voorcompagnieën) in the early 17th century.”

“It was established on March 20, 1602 as a chartered company to trade with India and Indianised Southeast Asian countries when the Dutch government granted it a 21-year monopoly on the Dutch spice trade.”

“…often labelled a trading company (i.e. a company of merchants who buy and sell goods produced by other people) or sometimes a shipping company… VOC was in fact a proto-conglomerate company… a transcontinental employer and an early pioneer of outward foreign direct investment.”

“The Company's investment projects helped raise the commercial and industrial potential of many underdeveloped or undeveloped regions of the world in the early modern period.”

”In the early 1600s, by widely issuing bonds and shares of stock to the general public, VOC became the world's first formally-listed public company… it was the first corporation to be listed on an official stock exchange.”

The “VOC” was a global giant which existed centuries before the stereotype of 20th Century global corporation.

This financial colossus had a dark side. It was “criticized for its monopolistic policy, exploitation, colonialism, uses of violence, and slavery”.

With a list of sins like that, it makes today’s objects of societal distrust and dread, a/k/a “the FANGs”, UBER, etc, look like amateurs in comparison.

But this empire fell 2 centuries after the company’s founding. Disruption comes for all.

”Socio-economic changes in Europe, the shift in power balance, and less successful financial management resulted in a slow decline of the VOC between 1720 and 1799.

After the financially disastrous Fourth Anglo-Dutch War (1780–1784), the company was nationalised in 1796, and finally dissolved in 1799.”

Today the pace of the rise and fall of commercial giants moves at Internet speed. For both winners and even more so for the “also rans”. We are all in awe of the winners, such as the “FANGs” and hot “SaaS” leaders, but let us pause and offer a moment of silence in memory of all the contenders for the cloud crown who now exist mostly in historical footnotes and wiki pages.

One of the first fast growing and hottest of Internet platforms fell in 2019 and I don’t refer to any of this year’s “unicorns”.

Friendster. (https://en.wikipedia.org/wiki/Friendster )

Friendster’s Wikipedia page:

”Friendster was founded by Canadian computer programmer Jonathan Abrams in 2002, before the wider adoption of MySpace (2003), Hi5 (2003), Facebook (2004) and other social networking sites.”

Friendster was one of the first of these sites to attain over 1 million members…
Friendster.com went live in 2002 and was adopted by 3 million users within the first few months … Google offered $30 million to buy out Friendster in 2003, but the offer was turned down.

“[It] was then funded by Kleiner, Perkins, Caufield & Byers and Benchmark Capital in October 2003 with a reported valuation of $53 million.”

Even by today’s standards, a valuation $50+M USD about 18 months after launch with 3+ million users is not bad. But it was not enough.

”In 2008 Friendster had a membership base of more than 115 million registered users and continued to grow in Asia.” While that sounded like respectable performance given the rise of Facebook, “[i]n 2009, the site was the subject of a satirical portrayal by The Onion News Network of the site's discovery as an archaeological relic, untouched since 2005”.

”On June 14, 2015, the site and all its services were shut down indefinitely, but the company continued to operate until the end of June 2018 and it would cease to exist as a domain name on January 1, 2019. Since then, the existence of the "Friendster" brand has vanished.”

In less than 2 decades one of the first of its kind internet platforms faded away.

It’s the tech startup version of the Greek myths when new gods sprung up to overthrow the Old Gods Cronus and the Titans. Cronus ran the universe but he was eventually overthrown by his son Zeus. The new will supplant the old. Not all upstarts for the crown however will survive and join a new pantheon of leaders. Some will fade away. https://www.theoi.com/Titan/TitanKronos.html

The “next Amazon” could be coming along with new leaders for the 2020/30s.

Jim Grant said, "QE made cheap and accessible the financing that prolonged the lives of companies that would otherwise have met their maker in some Delaware courtroom." Likewise for “The Big Stack”, a post-Big Short era, there have also been companies created which otherwise would have remained the stuff of napkin scribbling.

For each new “Amazon” we may expect new “Friendsters” as well. Let us be hopeful to invest in the next “new new thing” and mindful of the risk of the “what might have beens”.

Where to look: Koyfin created a quick list of where we can see the birth of both a new tech giant pantheon and the potential “also rans”. https://www.koyfin.com/ipo


And CB Insights also watches them (with a list of 300+ companies estimated to be worth in excess of $1T USD): https://www.cbinsights.com/research-unicorn-companies

New giants will emerge, dominate and perhaps be threatened with anti-trust charges/breakups - as had confronted IBM, AT&T and Microsoft and now Facebook. Some may mature into cash (or crypto) heavy leviathans and spew dividends for widows and orphans. Some however may be destined for Wikipedia.

But for even the winners, the end comes eventually. IBM and AT&T no longer dominate the public imagination as they once did. Old Gods fade.

The Ghost of The Dutch East India Company understands and waits for company.
(Visual Capitalist: the Dutch East India Company vs. today’s “giants”)

Nothing is forever - no Empire, God or Platform.Not even if they’re Zeus or a “FANG”.