For young innovative companies, who have successfully approached the stage of IPO, enriching the investors who believed in them, a special term "unicorns" - they were so rare.
The term "unicorn" was first used by venture capitalist Eileen Lee in 2013 G. to characterize a successful startup worth over 1 billion dollars. She singled out 39 American unicorns out of the total number in 60 thousand. (over a decade). Based on this, she calculated, what is the number of successful startups, achieved this status, is 0,07%, and there are four unicorns a year.
Super-unicorns were also mentioned - companies with a value 100 billion dollars. Li referred Facebook to them., Apple, Cisco, Amazon, Oracle, Google.
Eileen Lee pointed out common signs of unicorn companies:
1. They are generated by large waves of innovation - the invention of semiconductors, PC, Internet, Social.
2. During the period under study (2003– 2013), unicorn companies were associated with four lines of business:
- e-commerce;
- audience monetization through shareware consumption;
- programs as a service (SaaS);
- corporate software.
3. 90% founders - people with professional technical education, experienced in the implementation of business projects, including failed.
Eileen Lee's key findings are relevant, but there have been significant changes., related primarily to the increase in the number of unicorns.
Unicorns today
There is no single list of unicorn companies: their number differs due to the method of counting, variety of estimates and other factors.
So, analytical resource cbinsights.com provides data on 635 unicorns with a total cost 2,1 trillion dollars.
According to online platform crunchbase.com, their number is 780 companies.
And according to Dealroom statistics by April 2021 G., in the world there are 1437 unicorns. More than half of them are American companies.
Rice. 1. Regional distribution of unicorns. Data source: DealroomРис. 1. Regional distribution of unicorns. Data source: Dealroom
The list also includes Russian unicorn companies.. All of them, according to Dealroom estimates, four: «Avito», Ozone, Yandex and VKontakte.
To assess the prospects for the emergence of new unicorns, it suffices to say, that in the first quarter 2021 G. only in North America have investors invested in startups 72,7 billion dollars. This dynamic is fueled by ultra-low cost of loans and huge infusions of money from the government.: part of the funds goes to the venture capital market.
The specifics of unicorns
For every investor, interested in the topic of unicorns, good to know basic terms:
- Zebra - company, lost its billion dollar valuation, but continues to function successfully.
- Phoenix is an overrated unicorn, then lost value, but managed to be reborn at an even more successful level.
- Icarus is a promoted and overvalued company, whose capitalization collapsed quickly. A recent example is WeWork. At the beginning 2019 G. she was rated in 47 billion dollars, and already in August, after a failed IPO, the valuation fell to 10 billion dollars.
- Vaporware - a big announcement of a super product, which does not have the promised characteristics or does not appear on the market at all.
- Forecast stick - at first, the estimated profit changes little, but then its rapid growth is predicted, associated with successfully implemented innovations.
- Decacorns - unicorns, whose value is estimated at, equal to or greater than 10 billion dollars. There are more of them in the world 30. The most famous is SpaceX..
Differences between unicorns
If the capitalization of traditional companies is based on assets, past results, realistic plans, then unicorns are valued based on their projected earnings. It's not always clear, how will they receive income. An example is Telegram, valued in the tens of billions, thank you audiences in 500 million users, but damaging.
The estimated value of unicorns is not based on an IPO: they are estimated on the basis of forecasts and expenses of venture funds and private investors, who are interested parties.
These features bring to mind the dot-com boom of 1995-2001., associated with huge company valuations, operating in the growing Internet market. It ended with the fall of technology stocks in 2001-2002.: NASDAQ-100 fell to 78%. In October 2002 G. market lost 5 trillion dollars. capitalization. That didn't stop lucky investors from making billions., selling stocks of overvalued companies at the peak.
Even if the overall market situation remains favorable, one must remember the sad fate of individual, once successful startups.
Unicorns don't just run, but also fall
TO 2015 G. Theranos was considered one of the most promising unicorns in the US pharmaceutical sector. She was rated at 9 billion dollars. The business idea was to diagnose a patient's health based on a comprehensive analysis of his single drop of blood..
Theranos board of directors included Henry Kissinger and George Shultz (former secretaries of state), General James Mattis (future head of the Pentagon) and other influential figures. Theranos CEO Elizabeth Holmes was praised by the press: youngest female billionaire, innovative super-entrepreneur. She constantly appeared on television and on the cover of prestigious magazines.. Elizabeth Holmes was invited to the White House, she dated Barack Obama and Joseph Biden, helped raise funds for Hillary Clinton's presidential campaign.
Rice. 2. A significant role in the promotion of unicorns is played by the business media Rhys. 2. A significant role in the promotion of unicorns is played by business media
The end of the flight of the unicorn was put out in October 2015 G. article by The Wall Street Journal journalist John Carreira. It said, what:
- blood taken from patients is abundantly diluted with saline - this leads to a decrease in the accuracy of the results;
- blood tests are performed using devices from other companies, since the corresponding analyzer of Theranos itself was not ready for operation;
- the company has problems with certification by government agencies.
This was followed by articles, exposing the company and opening the public's eyes to its many problems.
The collapse of the unicorn has come in 2016 G., when Theranos was banned from laboratory activities, and the prosecutor's office opened an investigation against the company. Termination of cooperation with the Walgreen pharmacy chain followed: in the premises belonging to her, Theranos conducted the reception of patients. Prosecutions began: it took to settle numerous claims 900 mln USD., attracted earlier from private investors who trusted Elizabeth Holmes. Many of them were experienced businessmen.
IN 2018 G. Theranos agony came to an end - the company ceased to exist.
The victims of Theranos scam are media mogul Rupert Murdoch (Lost 121 mln USD.), richest man in Mexico Carlos Slim (Lost 25 mln USD.) and other prominent figures. Elizabeth Holmes herself not only lost her money, but also subjected to persecution by the FBI. She is threatened 20 years in prison.
The unicorn company is a successful tech start-up with a high valuation, which is not always supported by financial results. Low cost of borrowed funds, the rapid growth of the stock market and the pumping of public money into the economy are a prerequisite for the emergence of a large number of companies of this type. Investors can benefit from studying examples of promising unicorn companies, even if not for the purpose of long-term investment, then for short-term transactions.
