I spy a Unicorn!

Once upon a time, companies with a private market valuation of $1 billion or more were as rare as unicorns.  Today, companies that meet or exceed this high valuation have been labeled as such, but, with the increase in venture funding and innovative technology, they are no longer rare.  These venture-backed companies now run global empires and are rewriting the rules for multiple industries.

Globally, there are currently 310 private companies that have $1 billion or more valuations.   Together, they have a collective valuation of $1,052 billion and have raised nearly $257 billion.  The largest represented categories are Internet Software and Services (24%), E-commerce (13%), and Fintech (10%).  Geographically, 49% of the companies are based in the US (an increase of 2% from 2017), 30% from China (a 4% decrease from 2017), 6% from the UK, and 4% from India. Even though there are 310 companies who have the title unicorn, there is a disparity between the top valued companies and those who barely made the cut.  

The top 23 unicorns account for nearly $203 billion in combined valuation or 20% of the total valuation for all 310 companies.  There also are 19 companies (6% of total unicorns) that have also earned the name “decacorns” with $10B+ valuations.  Leading the ranks are household names like Uber ($72B), Asian ride-hailing rival Didi Chuxing ($56B), WeWork ($47B), e-cigarette maker JUUL Labs ($38B).  The highest valued company on the list is China’s Bytedance (aka Toutiao). Bytedance is a Chinese Internet technology company with popular content platforms.  SoftBank’s Vision Fund lead the most recent funding round ($3B) in November 2018. Following this round, Bytedance officially reached a $75B valuation

In 2018, 112 new companies grew horns and joined the ranks, a 58% increase from the 71 newcomersin 2017. The majority (39 companies) were from the Internet Software and Services category and are worth $64 billion.

The huge increase in newcomers is partially due to the increase in funding.  Today, $100 million rounds are no longer a shock and play a large part in these startups achieving unicorn status.  Similar to SoftBank’s Vision Fund, there are other venture funds that are created specifically to make large investments in late stage funding rounds.  It is unclear yet whether the face paced deployment of dry powder and large investments will pay off.  Because of the economic environment, many of these funds have been able to make strategic investments right before these companies go public with staggering valuations

The first wave of unicorns rose due to breakthrough technologies (cloud computing, AI, and the pervasiveness of smartphones) and applying them to different industries.  Many companies’ business models were based on mobilizing existing operations.  For example, Uber and Lyft changed the taxi industry and Stripe as an online payment platform.  CB Insights analysts and Kirsten Green, a venture capitalist at Forerunner Ventures, have echoed the same sentiments, that “maybe [upcoming unicorns are]not as sexy as the companies in the first wave.”  Rather than breaking and rebuilding industries, future unicorns will be modernizing existing industries that we all rely on.  

In 2015, CB Insights used an algorithm called Mosaics to create a list of future unicorns. That list currently has a 48% accuracy rate.  The algorithm compiles information on company heath, industry analysis, and other factors. Last month, January of 2019, CB Insights released their next round of predictions.

On the CB list of future unicorns, there are companies that focus on healthcare, millennial women, and agriculture.  Each of these companies have an opportunity to build off various emerging technologies to reduce costs and modernize existing business models.  Andrew McAfree and Erik Brynjofsson’s “Machine, Platform, Crowd: Harnessing Our Digital Future” highlighted the fact that we have only scratched the surface of emerging technologies’ capabilities.  Instead of focusing on industry changes, the next wave of unicorns could also create new applications of existing technologies to fully realize their potential.

Looking towards the future, CB Insights and New York Times have released their predictions on the next wave of unicorns.  Who do you think is next?

10 comments

  1. Very insightful blog! Honestly I think the next big Unicorn may come in the form of digitizing experiences. The brick and mortar retail business is one thing that has yet to be fully transformed. Yes, inventory can be checked in purchased online, but they fail to capture the in store experience. Regardless, I feel like we are lucky to be so young in a time where the number of Unicorns is constantly increasing. This gives us young entrepreneurs a glimmer of hope for those crazy business ideas we have hidden away in the notes of our phones. I think these statistics motivate today’s entrepreneurs more so than ever to quit being a “wantrepreneur” and start executing these ideas as they may just pay off!

  2. Really well written post! I had no idea that the “unicorns” were growing at such a fast rate. When taking a closer look at some of the companies on your graphics, I couldn’t help but think back to a video we watched in our very first class. I spoke about transformations going on in modern businesses right now and I definitely think these transformations are the common denominator in some of these companies. Mind to machine; product to platform; core to crowd. I believe the mindset created by these transformations (or maybe the other way around, the mindset needed to initiate these transformations) is a huge part in creating a company with the potential to grow to the level of a unicorn.
    While the status of unicorn no longer seems as unattainable as it once was, I think it also poses a challenge to existing unicorns to take it one step further and find new ways to set themselves apart from the pack. Maybe a $1T valuation will be the new unicorn status one day.

  3. I also had no idea that these high-valued “unicorns” were growing at such a fast rate, or that such a large amount of private companies were high-valued, but I suppose with a rapidly decreasing rate of IPOs that would make sense. Glossier gets my vote for the next unicorn (because I love their brand, but mostly because I don’t know many of the other names on that list). Glossier’s founders have created a strong connection to millennial women through their marketing and social media campaigns, and have created an experiential marketing masterpiece with their NYC flagship. The only other brand that I can think of that’s not on this list is Allbirds.

  4. This was such an eye-opening post! The statistics here are staggering, particularly with respect to the disproportionate contribution of a handful of these unicorns to the total valuation pool. I’d be interested to see how the SoftBank-led movement toward mass late-stage/pre-exit investment impacts the overall funding environment. While it seems to have the potential to incentivize exceptional innovation, I think it is also possible to envision a system that de-prioritizes seed and early-stage investment or becomes over-focused on companies that seek to operate/disrupt known markets, rather than those that seek to create entirely new market spaces. I’m also curious about the metrics on which VCs and other funding sources base these unicorn valuations – do you think the beginnings of a bubble are forming in this sphere of private business?

  5. Great insight into the rate at which Unicorns are growing – I listen to a podcast called Equity (it covers VC funding news) and from that I had a feeling that the rate of unicorns was going up but it’s nice to put some numbers on it. I think you do a really good job of noting that unicorns are supposed to be rare – I wonder if $1bn valuations have become so popular that they should move the finish line out further (aka $5bn or more), or whether people are just seeking these higher valuations just so they can get the ‘unicorn’ claim to fame.

    Either way I think funding in the valley has become a little absurd. And I think the majority of that is because of Softbank Vision Fund – they are investing like crazy and I think it is inflating the real value of companies. For example yesterday I heard about a company Nuro (they build robot delivery cars) that raised $940 million in one round from Softbank’s vision fund. That values the company at roughly around $2.7bn – and just to put it in perspective, to date they have only produced 6 of their robot cars – that means they’re valued at $450 million per car. If that’s not crazy then I don’t know what is.

    What I’d be really curious to know is, of the unicorns, how many have received funding from, or even had a funding round led by Softbank. I’d imagine a lot.

  6. This was so interesting to read, I also had no idea that “unicorns” were growing at such a crazy rate! Pretty cool that we get to live through this time. As someone who is an entrepreneurship co-concentration and aspires to start my own business one day, I love to hear about the increase in funding, and the increase in incredibly successful companies. To be honest I don’t recognize most of the companies on that list, but I’m definitely going to look into some of them now to make my predictions on who I think it next!

  7. The fact that JUUL Labs makes the decacorn list is terrifying! Bye bye Big Tobacco, hello giant juul companies?? Anyway, great post! This made me think about the rapid increase in billionaire individuals as well. I definitely agree that healthcare is the next wave, as financiers and entrepreneurs alike are increasingly placing their bets on healthcare and pharma, and healthcare is becoming the new luxury on the demand side.

  8. Awesome post! This was very eye opening to see the rate at which Unicorns are actually growing. I totally agree the huge influx of cash from VC’s at the moment is really propelling growth for many of these companies. In order to grow to this size, companies need to spend cash at high rates to gain new customers and keep up with product development. This reminds me of a concept I learned in a class I took last semester, Entrepreneurial Finance. We discussed how companies valuations may even fall as they announce their first profits. In today’s environment this deemphasizes growth prospects and therefore what investors believe the company is worth. No matter what, it is exciting to see the potential that so many companies have, and gives rise to a new generation of entrepreneurs interested in modernizing traditional industries.

  9. Wow, I echo a lot of the sentiments of commenters before, but this post was actually really surprising for me. I had no clue that evaluations this large were becoming so frequent, but with the emergence of these new technologies it makes sense that these companies are posed to provide huge value. While these early stage tech disruptors created new industries (networks) it makes sense that the next stage will look to revolutionize existing industry. I think it’s going to be really interesting to see the ways that standard non-tech native companies start to leverage data and these sophisticated learning technologies. Clearly there are companies capitalizing on the availability of new technology and starting to make traditional industries “smarter” and better able to serve consumers. It’s an exciting trend and absolutely something to look out for. Awesome post!

  10. Fantastic post! Definitely didn’t realize the scale of billion dollar companies but it makes sense. The barrier to entry for a lot of industries is getting lower and lower and technology is being applied to every facet of every industry. There are so many opportunities to use software to find value where it existed all along. Your post really made me think of this: https://a16z.com/2011/08/20/why-software-is-eating-the-world/ (originally published in 2011, which seems like forever ago – but the ideas are just as relevant today)

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