I don't
remember when I first saw a
unicorn,
although it might have been in the books about
Narnia. Nowadays they seem to
be everywhere, although they have much lost their looks. They also don't seem
to be all that attracted to virgins anymore, but more interested in angels. Not many people want to kill them (except for the competition) but quite a lot of them end up dead anyhow.
In 2013,
Aileen Lee, a veteran venture capitalist, identified 39 U.S.
start-ups U.S.-based software companies started since 2003 and valued at
over $1 billion by public or private market investors. Since this is a tiny
portion of the total amount of start-up companies, she called them unicorns to capture
how extremely rare and magical they are. Some of them you've probably heard of since they are consumer-oriented such as Uber, Facebook, LinkedIn, Twitter and Instagram while others such as Nicira, Splunk and Tableau target enterprises.
Since then
the concept has caught on (even though many seem to have forgotten who coined
it) and when searching on Google for unicorns you end up with more references
to companies then to the mythical creature (or it might be just the way Google
tweaks the search for me...).
In a recent
count (Nov 2015), Lee found 84 U.S. unicorns, which means an increase
of 115%. The picture illustrating the first article featured a single
unicorn, whereas the 2015 article has a whole heard at the top. However, the
numbers are changing all the time why there is a constantly updated unicorn leader-board. For
those interested in unicorns from other countries as well, can take a look at Fortune's compilation or the CB Insights list
updated in real time.
Since there
is now a substantial group of unicorns, others than Lee and her team have been
looking into what they have in common. Some like Adeo
Ressi, claims to have found the recipe for success: using a cycle of three main
tactics: (1) the Push, (2) the Markup, and (3) the Backfill. However, I must
say that this looks exactly like what VC put us though in the 90ies. I believe Heidi
Roizen fictive story is much more pedagogical, although it tells you what
not to do.
As is usual
when it comes to VC information, it is focused on valuation and capital raised
and not so much about the company is doing in terms of sales, profits and
customers. And it is also the question of how the valuation has been done, by
investors (creating so called paper unicorns) or the market. At least one of
the unicorn CEOs is not happy about being bunched together with the other creatures:
"Much
the way all wildlife isn’t the same, all unicorn companies don't share the same
degree of long-term promise. No one's interests are best served by prescribing
the same, one-size-fits-all outlook to such a wide breadth of startups. And
judging a category by valuation alone isn't just unfairly harming the
reputations of the companies concerned. It's also exaggerating the popular
impression of a tech bubble that's ready to burst." Kirk
Krappe, chairman and CEO of Apttus
Since the
birth rate of unicorn has
started
to decline, more and more articles have been published containing warnings
about an increase in unicorn mortality. For example,
The
Economist claims that it has become clearer that the high valuations firms
achieve in private are not always maintained when they go public.
The
Bloomberg View concludes that few unicorns have what it takes to protect an
acquired monopoly.
CNBC
is concerned with the lack of public IPOs among the unicorns.
Doug
Henwood compares the current situation to the dot. boom and at least takes
comfort in that fewer households are now investing in stocks than before.
"Of
course, when this bubble bursts—as it inevitably will, especially with the Fed
having ended its massive money injections and now talking about raising
interest rates in the fall—the narrow holding of tech investments means that
fewer innocents will suffer collateral damage from the implosion." Doug
Henwood
However,
some claim there is no bubble at all. Miguel
Helft at Forbes puts it like this:
"Taken
as a whole, the 93 firms based in the U.S. (Americorns?) are worth $322
billion, 14% less than Microsoft and a bit more than Intel and Cisco combined.
Which would you rather own long term? Microsoft or a basket that includes Uber,
Airbnb, Snapchat and Pinterest along with scores of others, a few of which will
surely emerge as future PayPals, Twitters or Fitbits? Is that even a hard
decision? And if not, what are we worried about? Quite the contrary: If you’re
looking for growth, the unicorns minted in the last few years may well be one
of the most attractive investments anywhere." Miguel
Helft
Well, similar to Andrew
Chen I like companies that set out to live forever rather than to
become unicorns. I suppose I simply like workhorses better than unicorns.
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