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?