Unicorns – as well as being a mythical creatures with large pointy horns mentioned by the ancient Greeks, various writers including Strabo, Pliny the Younger and Aelian, The Bible and featuring in My Little Pony – is also the name given to a company, usually a start-up, that doesn’t have an established performance record but has an estimated value of more than one billion dollars. This valuation is reached by either their listed market capitalisation, or by investors – if a business raises one hundred million dollars by selling ten per cent of its shares, it’s overall value is, therefore, a billion. It seems too that some are just self declared unicorns by ambitious, or optimistic, business owners who believe their businesses are worth a billion or more.

Most unicorns are technology businesses and there are some very high profile ones – Twitter, Snapchat, Uber, Airbnb and Spotify to name but a few. Some of the figures surrounding these businesses are mind boggling both from a valuation and a profitability point of view. Twitter floated for $31B but lost $457M in 2016 with a turnover of just $607M. More recently, Snapchat floated on the New York Stock Exchange with a valuation of $25B despite losing $514M in 2016 with revenues of only $404M. Obviously investors see huge potential in these businesses (although it’s worth noting Twitter’s valuation has slipped to £13B since flotation) hoping that they’ve backed the next Facebook. Facebook continues to meet its potential by, very successfully, generating huge profits through ‘monetizing’ its services which is the big challenge for the likes of Twitter and Snapchat – how do they actually make money from their many millions of users?

Not all unicorns are based in Silicon Valley however. The UK is home to 18 of 47 European unicorns including Asos, Transferwise and Zoopla, making it the leading technology country in Europe, ahead of Sweden which counts Spotify as a resident. And not all unicorns go onto achieve their predicted valuations as the recent collapse of UK based Ve Interactive demonstrates, providing a salutary lesson in over optimism, unrealistic expectations and, ultimately, greed.

Software company Ve Interactive built tools designed to recover abandoned carts by convincing online shoppers to complete their purchases with pop-ups and follow-up emails. It also sold re-marketing adverts which follow user’s journey online after they’ve visited a website. The business was tipped to hit a $10bn valuation, it raised over £50M from investors and topped The Sunday Times Tech Track 100 league.

Ve Interactive’s enigmatic chief executive, David Brown, fueled the hype comparing the business to Amazon, Facebook, eBay, Google and Twitter estimating its potential future value at $30B. Interestingly, in terms of funding, he avoided institutional investors in favour of smaller, high-net-worth individuals which included some high profile investors, such as David Furnish, Sir John Hegarty, Aston Merrygold of JLS fame and Tom Teichman a renowned tech investor.

It seems David believed his own hype adopting the lifestyle of of a Silicon Valley billionaire. Despite, or perhaps regardless of, mounting losses, his expenditure was somewhat extravagant; £70,000 worth of Tree Couture furniture in his office; an £180k Overfinch Range Rover with 2 drivers; over £45,000 spent on fine wines; chartered jets; and a £6,930 a month flat in Covent Garden. This was coupled with the use of some £11M of investors’ money to support personal side-projects – a myriad of  irregular business dealings in which he supported other businesses owned by himself, his partner and his girlfriend.

Ve Interactive repeatedly missed targets on profitability and made a loss of £16.5M in 2015. Ultimately time, the patience of investors and HMRC ran out and Ve went into administration in March. Those private investors lost all of their £55M and the business had further debts of £50M. What remained was bought by a consortium including its chief executive Morten Tonnesen and the Scottish businessman Doug Barrowman for just £2M in a pre-pack deal. The new owners are now restructuring the business leaving its 850 employees facing an uncertain future.

It seems this particular unicorn’s failure may have been due as much to imprudence, mismanagement or possibly even impropriety, as much the business proposition. Either way, it’s clearly a high profile technology start-up which failed to live up to over optimistic promises and it raises the need to question some of the claims of the entrepreneurs making them. Above all, it offers a sobering warning about burning money and the dangers of blind enthusiasm for technology unicorns.