Topics covered:
- Meaning;
- Unicorns in India;
- How to spot a Unicorn Startup?
- Reasons behind their rapid growth.
Other than Unicorns, there are decacorns and hectocorns. A decacorn is a word used for those companies over $10 billion, while hectocorn is the term used for a company valued over $100 billion.
According to TechCrunch, there were 279 unicorns as of March 2018. The largest unicorns included Ant Financial, DiDi, Airbnb, Stripe and Palantir Technologies. Lyft is the most recent decacorn that turned into a public company on March 29, 2019. Thirty-two new unicorns startups valued at $1 billion or more were born in the Silicon Valley this year. They included flavored nicotine seller Juul Labs (valuation: $38 billion), food-delivery service DoorDash ($4 billion), and sneaker company Allbirds ($1.4 billion). The new unicorns join an already sizable herd. According to startup-tracker CB Insights, there over 300 unicorns, roughly half of which are based in the US. They are valued at a cumulative $1 trillion.
Unicorns are supposed to be rare. But the “unicorns” of Silicon Valley no longer are. In 2014, 42 new unicorns were born in in the US alone, 43 in 2015, 22 in 2016, and another 34 in 2017, according to PitchBook. US tech industry has averaged 35 new unicorns a year for the last five years, more than eight times the rate from when Lee coined the term.
There are way too many unicorns in Silicon Valley now. Unicorns companies valued at over $1 billion were once a rarity in Silicon Valley. Lately, though, unicorns are everywhere. Companies are now distinguished by how quickly they earned it. In June 2018, electric-scooter company, Bird became the fastest startup ever to achieve unicorn status, reaching a $1 billion valuation a little more than a year after it was founded. Other unicorns are so wealthy that we talk about them unironically as decacorns.
Unicorn Startups in India:
India’s four largest unicorn startups are in the areas of online payments, e-commerce, ride-hailing and education. Some say that India's unicorn startups are more like workhorses, catering to the most basic needs that people are already spending on. The most typical example of this could be the app called Chalo, one of Waterbridges recent investments, offers commuters real-time bus timetables and locations. It couldn't get more mundane than public transportation. Out of the top 10 Indian Unicorns (based on value), 9 are in online consumer space, the one outlier being an independent wind and solar-energy producer, named ReNew Power. On the other hand, in China, 3 of the top 10 are online consumer companies, 2 are bricks-and-mortar businesses and the rest are a mix of hardware and B2B.
India’s startup club of unicorn firms is growing faster than ever. In 2019 alone, India has produced over half a dozen unicorns so far, a new one was added just last week. Icertis, a contract management software platform raised $115 million led by US-based venture capital firm Greycroft and Premji Invest. The other unicorns created this year include grocery startup BigBasket, trucking logistics firm Rivigo, e-commerce logistics firm Delhivery, software firm Druva, fantasy gaming startup Dream11, IT healthcare firm CitiusTech and Ola Electric, the electric vehicle arm spun off from ride-hailing startup Ola, itself one of India’s earliest unicorns, according to data from Venture Intelligence.
The list of unicorns created this year is at par with all of 2018, and we are just halfway through the year yet. 2018 was a record-breaking year too, with hotelier Oyo Rooms, insurer Policybazaar, food delivery firms Swiggy and Zomato, online retailer Paytm Mallsoftware firm Freshworks, payment firm Billdesk and business-to-business marketplace Udaan all becoming unicorns.
Out of the 25 unicorns in India, so far, 15 of them are from 2018, indicating the surging number of scalable firms, the data from Venture Intelligence says.
How do you spot a Unicorn?
Let us learn how to spot a unicorn from Hans Tung. He is one of the few venture capitalists who has grabbed an equal number of opportunities by investing on both sides of the Pacific. During his career, he has invested in 11 startups that have gone on to attain billion-dollar valuations, including Airbnb, Bytedance, Slack, Wish and Xiaomi.
When asked, "What do you look for in a startup?" and "How early can you tell that a company has the potential to become a billion-dollar company?"
Tung said, "What we look for are founders whose personalities and background experiences are suitable for the markets they are building. The founder and the product need to fit together. We also want the market to be big enough so that we can have the outcome of a billion-dollar company.
With a company like Xiaomi, I invested because I understood what the founder Lei Jun was trying to do. His vision made sense to me. Usually, we invest at the series A or B stage, so the company is about one to three years old. In the US, companies have sometimes changed their model one or two times by that stage before they found the right one. In China, this happens less often. The founders tend to be clearer about what they want to do from day one. They may not get the products right the first time, but the direction is set from the beginning." (To know more click here.)
Reasons behind the rapid growth of unicorns:
1. Fast-growing strategy
Investors and venture capital firms are adopting the get big fast (GBF) strategy for startups. It is a strategy where a startup tries to expand at a high rate through large funding rounds and price cutting to gain an advantage on market share and push away rival competitors as fast as possible. The rapid exponential returns through this strategy seem to be attractive to all parties involved. However, there is always the cautionary note of the dot-com bubble of 2000 and the lack of long-term sustainability in value creation of the companies born from the Internet age.
2. Company buyouts
Many unicorns were created through buyouts from large public companies. In a low-interest rate and slow-growth environment, many companies like Apple, Facebook, and Google focus on acquisitions instead of focusing on capital expenditures and development of internal investment projects. Some large companies would rather expand their businesses by buying out established technology and business models rather than creating it themselves.
3. Increase of private capital available
The average age of a technology company before it goes public is 11 years, as opposed to an average life of four years back in 1999. This new dynamic stems from the increased amount of private capital available to unicorns. The amount of private capital invested in software companies has increased three-fold from 2013 to 2015.
4. Prevent IPO
Due to many funding rounds, companies do not need to go through an initial public offering IPO to obtain capital or a higher valuation; they can just go back to their investors for more capital. IPOs also run the risk of devaluation of a company if the public market thinks a company is worth less than its investors.
5. Technological advancements
Startups are taking advantage of the flood of new technology of the last decade to obtain Unicorn status. With the explosion of social media and access to millions utilizing this technology to gain massive economies of scale, startups have the ability to expand their business faster than ever. New innovations in technology including mobile smartphones, P2P (peer-to-peer) platforms, and cloud computing with the combination of social media applications has aided in the growth of unicorns.
Reference:
- https://en.wikipedia.org/wiki/Unicorn_(finance)
- https://qz.com/1510648/why-do-we-still-call-billion-dollar-startups-unicorns/
- https://www.livemint.com/companies/start-ups/india-s-unicorn-tribe-grows-faster-than-ever-this-year-1563593970553.html
- https://en.wikipedia.org/wiki/List_of_unicorn_startup_companies
- https://www.thehindubusinessline.com/companies/indias-unicorn-startups-are-more-like-workhorses/article28570070.ece
- http://www.forbesindia.com/article/ckgsb/ggv-capital-unicorn-factory/54419/1
- https://www.forbes.com/sites/bizcarson/2018/10/15/billion-dollars-or-bust-a-scorecard-of-whether-75-promising-startups-became-unicorns/
- https://www.forbes.com/sites/bizcarson/2018/10/15/billion-dollars-or-bust-a-scorecard-of-whether-75-promising-startups-became-unicorns/
No comments:
Post a Comment