Like Bananas, Most Unicorn Startups Peak When Underripe

Like most people who regularly add bananas to the grocery cart, I’ve become something of an expert on their lifecycle.

Not until today, however, did I consider the parallels between this ubiquitous fruit and the typical startup.

The core similarity is this: The banana — much like a startup — peaks when slightly underripe.

In the case of bananas, power eaters recognize the indicators. Ideally, it should be sweet but not overly so, bright yellow with a vestige of green on the peel, and a texture that maintains a hint of firmness.

Leave a banana out even a day past this consummate ripeness, and it will still be edible. But it will be mushier, more shriveled, and likely riddled with brown spots. Leave it out a few more days and it will continue to be edible — just not all that appetizing.

For a startup, ripeness indicators are also easy to recognize, at least in hindsight. Like a banana, an upstart company’s desirability tends to peak when its potential is both most obvious and mostly unrealized.

One measure of this is when someone completely unconnected from the startup scene has heard of said company. It’s the point when that person might think: “I only just learned about this, but I bet it’s going to be big.”

Best laid plans

Commonly, entire sectors hit peak ripeness at that moment when everyone thinks it’s a great idea and no one has to actually make money on it yet.

We saw this during the pandemic, when upstarts like remote meeting platform Hopin and audio social network Clubhouse hit star unicorn status amid expectations that we’d all want to connect this way. Turns out we didn’t.

The IPO and SPAC boom of 2021 also brought to market a bumper crop of startups that seemed like the wave of the future until they quickly lost their allure with investors. This included several tied to autonomous vehicles that saw their valuations drive off a cliff, erasing billions in market cap.

Around the same time, we also saw a renewed e-commerce boom, with upstart direct-to-consumer brands and online retail rollup plays attracting billions. That also didn’t last. Or don’t forget scooter-mania — a well-documented bust preceded by a brief period when venture capitalists were convinced they’d found a coveted solution to the last-mile transportation conundrum.

Spotty success

Even startups that did manage to succeed as large-cap companies saw some pretty peaky valuations in their early days, especially considering the risks along the way.

Take Uber, which had a whopping $40 billion valuation back in 2014, despite its history of steep losses and controversial “embrace the chaos” corporate culture. Those who invested then have done well, but it was never a given. Rival Lyft, for instance, remains far below its peak pre-IPO valuation, while Sidecar and other competing ride-hailing companies have long since folded.

Or consider Robinhood, which went public four years ago at a $32 billion valuation, spent the next few years at roughly a quarter that level, and only recently rebounded. Other formerly red-hot fintechs that went public around the same time, like SoFi and Affirm, have also recovered but remain below their initial heights.

Examples abound of other venture favorites that are still around but haven’t recaptured their early enthusiasm. This includes electric vehicle maker Rivian, process automation software provider UiPath, and online class provider Coursera, among a long list of others.

Like overripe bananas, these brands remain functionally not too different than they were a few years ago. But back then they apparently seemed much more appealing.

Of course, ideally, startups shouldn’t have shelf lives. They’d keep flourishing just like the hockey stick growth projections used to woo investors.

Some do manage to achieve something like this. Like a freeze-dried banana, they’ve circumvented the onset of mushiness. It’s an accomplishment worthy of celebration.

However, they are also the exception. In coming quarters as we watch the huge backlog of one-time unicorns, it will be abundantly clear that many are long past their peak ripeness date.