Tech Transformers

Forget unicorns, chase 'cockroaches': Flickr founder


Valuations for tech startups seemingly know no bounds but the co-founder of Flickr told CNBC that she believes tech startups worth $1 billion or more – the so-called "unicorns" of the industry – are "highly over-valued."

"I recently wrote a blogpost about this which was about the unicorns and the cockroaches. I do think that the unicorns are highly over-valued," Caterina Fake, who co-founded the photo sharing site Flickr and recommendations engine Hunch, told CNBC Wednesday.

"There is this accumulation of capital in a very small number of companies and this is very bad for the eco-system in general and there are thousands of very sturdy, hard-working and long-lasting 'cockroaches', as I call them, that is companies that will last through difficult times in the rise and fall of economics of tech."

Advertising participants flash signs during an announcement that Yahoo acquired the Tumblr blogging site in order to upgrade its Flickr site, in New York, May 20, 2013.
Photographer | Collection | Getty Images

Flickr was sold to Yahoo in 2005 for around $35 million, while Hunch, which was founded in 2007, is said to have been sold to eBay in 2011 for around $80 million. The startup had reportedly turned down an offer from Google in the previous year for $60 million.

Since then, the valuations of startups such as Instagram and Snapchat, have risen exponentially. Instagram was valued at $34 billion by Citigroup analysts last year and Snapchat was valued at $16 billion in a recent funding round, according to reports earlier this year.

Stewart Butterfield, co-founder of Slack and Flickr.
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Hunch was co-founded by Fake and prominent angel investor Chris Dixon. Angel investors are well-known in the tech industry where start-ups rely on venture capital to realize their potential. Fake believed that investment should follow some of the "cockroaches" of the tech world and said "venture capitalists are not doing what they're supposed to be doing ,which is to take risks."

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Fake was speaking to CNBC on the sidelines of the Slush 2015 conference in Helsinki which enables European and Asian startups to meet with international investors. European tech startups, in particular, have a problem attracting investment, Fake said.

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"There are plenty of eager, hard-working, innovative and creative people everywhere but they just need more capital," she said.

"Eventually it (the level of investment) will get there but there just need to be a few great tech successes and then it tends to feed into the venture capital community. But right now it is actually a big lack in Europe and other parts of the world."