The term Jumping the Shark can be traced back to the fifth season of the celebrated sitcom Happy Days when one of the main characters, Arthur Fonzarelli (Fonzie) played by Henry Winkler, proved his toughness by jumping on water skis over a shark in a cage while the 50’s era group of friends were visiting Los Angeles.
While it is true that the show continued on for another seven seasons after this fateful event, any Happy Days aficionado (I know you’re out there) will tell you that the scene with Fonzie jumping the shark was the beginning of the end for arguably one of the most popular shows in network TV history.
The term jumping the shark now signifies the moment when something has crested, a bad decision was made, we took a wrong turn, etc.
Have private company valuations jumped the shark? Let’s review some of the recent largesse garnered by a few unicorns.
- WeWork which provides office space to small companies in urban areas recently raised over $350 million, giving it a valuation of $5 billion
- Snapchat, the mercurial disappearing picture company out of LA scooped up another $200 million in February giving it a valuation of $15 billion
- Airbnb has a valuation of $20 billion after raising another $1 billion a month ago to grow the online rental platform
- And the granddaddy of them all, Uber recently picked up another $1.6 billion (cuz they could) giving it total funds raised to date of roughly $6 billion and a valuation north of $42 billion
Call Captain Quint because the shark is circling!
Like Happy Days, I think this will be a gradual decline.
In 6, 12, 24 months (the longer the better), I think we will look back at this period and possibly some of the aforementioned deals as the point in time that marked the beginning of the downturn.
There are still enough of us around who remember March 10, 2000, the day that the Nasdaq peaked at 5048 (closing price). It has taken 15 years for the market to tickle that number again. The coming downturn will not reach similar apocalyptic proportions. But, when the music stops, the guys and gals who wrote checks to Uber at a $40+ billion valuation may be looking for a chair.