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Wikipedia

Unicorn (finance)

August 25, 2023

In business, a unicorn is a privately held startup company valued at over US$1 billion.[1]: 1270 [2] The term was first published in 2013, coined by venture capitalist Aileen Lee, choosing the mythical animal to represent the statistical rarity of such successful ventures.[3][4][5][6]

CB Insights identified 1,170 unicorns worldwide as of June 2022.[7] Unicorns with over $10 billion in valuation have been designated as "decacorn" companies.[8] For private companies valued over $100 billion, the terms "centicorn" and "hectocorn" have been used.[9]

History

Aileen Lee originated the term "unicorn" in a 2013 TechCrunch article, "Welcome To The Unicorn Club: Learning from Billion-Dollar Startups".[4] At the time, 39 companies were identified as unicorns.[10] In a different study done by Harvard Business Review, it was determined that startups founded between 2012 and 2015 were growing in valuation twice as fast as startup companies founded between 2000 and 2003.[11]

In 2018, 16 US companies became unicorns, resulting in 119 private companies worldwide valued at $1 billion or more.[12]

Globally, according to CB Insights, there were more than 803 unicorns as of August 2021, with ByteDance, SpaceX and Stripe among the largest,[13] and 30 decacorns, including SpaceX, Getir, Goto, J&T Express, Stripe, and Klarna.[13]

The surge of unicorns was reported as "meteoric" for 2021, with $71 billion invested in 340 new companies, a banner year for startups and for the US venture capital industry; the unprecedented number of companies valued at more than $1 billion during 2021 exceeded the sum total of the five previous years.[14] Six months later, in June 2022, 1,170 total unicorns were reported.[15] More than 90 unicorns have been created by Israelis.[16]

Reasons for rapid growth of unicorns

Fast-growing strategy

During the mid-2000s, investors and venture capital firms were adopting first-mover advantage and get big fast (GBF) strategies for startups, also known by the neologism, "blitzscaling".[17] GBF 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.[18] The rapid returns through this strategy seem to be attractive to all parties involved, despite the cautionary note of the dot-com bubble of 2000, as well as a lack of long-term sustainability in value creation of emerging companies of the Internet age.[19]

Company buyouts

Many unicorns were created through buyouts by large public companies. In a low-interest-rate and slow-growth environment, many companies like Apple, Meta, and Google focus on acquisitions instead of focusing on capital expenditures and development of internal investment projects.[20] Some large companies would rather bolster their businesses through buying out established technology and business models rather than creating it themselves.

Increase in private capital available

The average age of a technology company before it goes public is 11 years, as opposed to an average life of 4 years back in 1999.[21] This new dynamic stems from the increased amount of private capital available to unicorns and the passing of the US's Jumpstart Our Business Startups (JOBS) Act in 2012, which increased by a factor of four the number of shareholders a company can have before it has to disclose its financials publicly. The amount of private capital invested in software companies has increased three-fold from 2013 to 2015.[22]

Prevent IPO

Through 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.[22] A few recent examples of this situation were Square, best known for its mobile payments and financial services business, and Trivago, a popular German hotel search engine, both of which were priced below their initial offer prices by the market.[23][24] This was because of the severe over-valuation of both companies in the private market by investors and venture capital firms. The market did not agree with both companies' valuations, and therefore, dropped the price of each stock from their initial IPO range.

Investors and startups may choose to avoid an IPO due to increased regulations. Regulations like the Sarbanes–Oxley Act have implemented more stringent regulations following several bankruptcy cases in the U.S. market that many of these companies want to avoid.[20]

Technological advances

Startups have capitalized on the rapid growth of new technology to obtain unicorn status. With the advent 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.[20] New innovations in technology including mobile smartphones, P2P platforms, and cloud computing with the combination of social media applications has aided in the growth of unicorns.[citation needed]

Valuation

The valuations that designate start-up companies as unicorns and decacorns differ more established companies. A valuation for an established company stems from past years' performances, while a start-up company's valuation is derived from its growth opportunities and its expected development in the long-term for its potential market.[25] Valuations for unicorns usually result from funding rounds of large venture capital firms investing in a start-up company. Another significant final valuation of start-ups is when a much larger company buys out a company, giving it that valuation; some examples are Unilever buying Dollar Shave Club[26] and Facebook buying Instagram[27] for $1 billion each, effectively turning Dollar Shave Club and Instagram into unicorns.

Bill Gurley, a partner at venture capital firm Benchmark, predicted in March 2015 and earlier that the rapid increase in the number of unicorns may "have moved into a world that is both speculative and unsustainable", that will leave in its wake what he terms "dead unicorns".[28][29][30] Also he said that the main reason of unicorns' valuation is the "excessive amount of money" available for them.[31] Similarly, in 2015 William Danoff, who manages the Fidelity Contrafund, said unicorns might be "going to lose a bit of luster" due to their more frequent occurrence and several cases of their stock price being devalued.[32] Research by Stanford professors published in 2018 suggests that unicorns are overvalued by an average of 48%.[33][34]

Valuation of high-growth companies

For high-growth companies looking for the highest valuations possible, it comes down to potential and opportunity. When investors of high-growth companies are deciding on whether they should invest in a company or not, they look for signs of a home run to make exponential returns on their investment along with the right personality that fits the company.[35] To give such high valuations in funding rounds, venture capital firms have to believe in the vision of both the entrepreneur and the company as a whole. They have to believe the company can evolve from its unstable, uncertain present standing into a company that can generate and sustain moderate growth in the future.[25]

Market sizing

To judge the potential future growth of a company, there needs to be an in-depth analysis of the target market.[25] When a company or investor determines its market size, there are a few steps they need to consider to figure out how large the market really is:[36]

After the market is reasonably estimated, a financial forecast can be made based on the size of the market and how much a company thinks it can grow in a certain time period.

Estimation of finances

To properly judge the valuation of a company after the revenue forecast is completed, a forecast of the operating margin, analysis of needed capital investments, and return on invested capital needs to be completed to judge the growth and potential return to investors of a company.[25] Assumptions of where a company can grow to needs to be realistic, especially when trying to get venture capital firms to give the valuation a company wants. Venture capitalists know the payout on their investment will not be realized for another five to ten years, and they want to make sure from the start that financial forecasts are realistic.[35]

Valuation methods

With the financial forecasts set, investors need to know what the company should be valued in the present day. This is where more established valuation methods become more relevant.

This includes the three most common valuation methods:[38]

Investors can derive a final valuation from these methods and the amount of capital they offer for a percentage of equity within a company becomes the final valuation for a startup. Competitor financials and past transactions also play an important part when providing a basis for valuing a startup and finding a correct valuation for these companies.

Trends

Sharing economy

The sharing economy, also known as "collaborative consumption" or "on-demand economy", is based on the concept of sharing personal resources. This trend of sharing resources has made three of the top five largest unicorns (Uber, DiDi, and Airbnb) become the most valuable startups in the world. The economic trends of the 2010s powered consumers to learn to be more conservative with spending and the sharing economy reflected this.[39]

E-commerce

E-commerce and the innovation of the online marketplace have been slowly taking over the needs for physical locations of store brands. A prime example of this is the decline of malls within the United States, the sales of which declined from $87.46 billion in 2005 to $60.65 billion in 2015.[40] The emergence of e-commerce companies like Amazon and Alibaba (both unicorns before they went public) has decreased the need for physical locations to buy consumer goods. Many large corporations have seen this trend for a while and have tried to adapt to the e-commerce trend. Walmart in 2016 bought Jet.com, an American e-commerce company, for $3.3 billion to try to adapt to consumer preferences.[41]

Innovative business model

In support of the sharing economy, unicorns and successful startups have built an operating model defined as "network orchestrators".[42] In this business model, there is a network of peers creating value through interaction and sharing. Network orchestrators may sell products/services, collaborate, share reviews, and build relations through their businesses. Examples of network orchestrators include all sharing economy companies (i.e. Uber, Airbnb), companies that let consumers share information (i.e. TripAdvisor, Yelp), and peer-to-peer or business-to-person selling platforms (i.e. Amazon, Alibaba).

Criticism

The categorization of startups as unicorns has not been without criticism. For example, an economic policy focus on enabling more unicorns, as the European Union is striving to do,[43] threatens to lose sight of other societally desirable forms of entrepreneurship.[44] Similarly, the definition of unicorns is characterized as only superficially precise. Additionally, a focus on unicorns runs the risk of causing increased unethical behavior among entrepreneurs (such as in the Theranos case).

2022 Unicorn Dismount

Many unicorns saw their valuations fall in 2022 as an result of an economic slowdown caused by the COVID-19 pandemic, an increase in interest rates causing the cost of borrowing to grow,[45] increased market volatility, stricter regulatory scrutiny & underperformance. As a result, many unicorns saw their valuations fall or were acquired by larger companies at lower prices than expected.

The pandemic had a significant impact on the global economy and many startups were negatively affected by the resulting slowdown in consumer spending and decreased investment. The increased volatility in financial markets made it more difficult for startups to raise capital and also caused a decrease in their valuation. With the rise of unicorns, regulators began to pay more attention to these companies, resulting in increased regulatory scrutiny and oversight. As a result, some unicorns faced legal and financial challenges, lowering their valuation. Intense competition, an ability to scale quickly, or mismanagement were common factors that caused unicorns to fail to meet investor expectations, resulting in a lowered valuation.

See also

References

  1. ^ Hirst, Scott; Kastiel, Kobi (2019-05-01). "Corporate Governance by Index Exclusion". Boston University Law Review. 99 (3): 1229.
  2. ^ Cristea, Ioana A.; Cahan, Eli M.; Ioannidis, John P. A. (April 2019). "Stealth research: Lack of peer‐reviewed evidence from healthcare unicorns". European Journal of Clinical Investigation. 49 (4): e13072. doi:10.1111/eci.13072. ISSN 0014-2972. PMID 30690709.
  3. ^ Rodriguez, Salvador (September 3, 2015). "The Real Reason Everyone Calls Billion-Dollar Startups 'Unicorns'". International Business Times. IBT Media Inc. Retrieved January 3, 2017.
  4. ^ a b Lee, Aileen (2013). "Welcome To The Unicorn Club: Learning From Billion-Dollar Startups". TechCrunch. Retrieved 26 December 2015. 39 companies belong to what we call the 'Unicorn Club' (by our definition, U.S.-based software companies started since 2003 and valued at over $1 billion by public or private market investors)... about .07 percent of venture-backed consumer and enterprise software startups
  5. ^ Griffith, Erin & Primack, Dan (2015). "The Age of Unicorns". Fortune. Retrieved 26 December 2015. Subtitle: The billion-dollar tech startup was supposed to be the stuff of myth. Now they seem to be... everywhere.
  6. ^ Chohan, Usman (2016). "It's Hard to Hate a Unicorn, Until it Gores You". The Conversation. Retrieved 26 October 2016.
  7. ^ "The Complete List Of Unicorn Companies". CB Insights. Retrieved 2022-07-01.
  8. ^ "What Is A Decacorn? The Era Of Decacorn Companies". FourWeekMBA. 2019-01-25. Retrieved 2021-08-29.
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  17. ^ Hackford, Heidi (January 11, 2019). "BLITZSCALING: HOW SILICON VALLEY LEARNED TO GROW". computerhistory.org. Retrieved 2022-07-03.
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  21. ^ "To fly, to fall, to fly again". The Economist. 2015-07-25. ISSN 0013-0613. Retrieved 2017-03-30.
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  24. ^ Balakrishnan, Anita (2016-12-16). "Trivago IPO opens at $11.20 after pricing at $11, below its expected range". CNBC. Retrieved 2017-03-31.
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  26. ^ "Unilever Buys Dollar Shave Club for $1 Billion". Fortune. Retrieved 2017-03-30.
  27. ^ Raice, Shayndi; Ante, Spencer E. (2012-04-10). "Insta-Rich: $1 Billion for Instagram". Wall Street Journal. ISSN 0099-9660. Retrieved 2017-03-30.
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  30. ^ Griffith, Erin (2015). "Bill Gurley Predicts 'Dead Unicorns' in Startup-Land this Year". Fortune. Retrieved 26 December 2015. Subtitle: A crash would affect more than just startups. ... Bill Gurley, the prominent investor behind Uber and Snapchat, has been sounding the tech bubble alarm for months now. He's preached about the dangerous appetite for risk in the market, the alarmingly high burn rates and the excess of capital sloshing around in Silicon Valley. "There is no fear in Silicon Valley right now," he said. "A complete absence of fear." He added that more people are employed by money-losing companies in Silicon Valley than ever before. Will there be a crash? "I do think you'll see some dead unicorns this year," he said, using the term used to describe startups with valuations higher than $1 billion.
  31. ^ Rob Price (2018). "Legendary investor Bill Gurley says that there's a 'systematic problem in Silicon Valley' because it's too easy to get cash". Business Insider. Retrieved 12 March 2018. There's so much easy money in the tech industry, entrepreneurs can afford not to be accountable to their investors. That "excessive amount of money," he says, can inflate a startup's valuation—even if they don't deserve it.
  32. ^ Reuters (01 December 2015). Fidelity star Danoff grows cautious about unicorn phenomenon, CNBC.com, accessed 31 Jan 2020
  33. ^ Gornall and Strebulaev (2018). "Squaring Venture Capital Valuations with Reality". Stanford University Working Paper. SSRN 2955455. We develop a valuation model for venture capital-backed companies and apply it to 135 U.S. unicorns—private companies with reported valuations above $1 billion. We value unicorns using financial terms from legal filings and find reported unicorn post-money valuations average 48% above fair value, with 13 being more than 100% above.
  34. ^ Sorkin, Andrew (2017). "How Valuable Is a Unicorn? Maybe Not as Much as It Claims to Be". New York Times. Retrieved 11 March 2018. The average unicorn is worth half the headline price tag that is put out after each new valuation.
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  36. ^ Zhuo, Tx (2016-03-07). "5 Strategies to Effectively Determine Your Market Size". Entrepreneur. Retrieved 2017-03-30.
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  38. ^ "Valuation methods | Venture Valuation". www.venturevaluation.com. Retrieved 2017-03-30.
  39. ^ Newlands, Murray (July 17, 2015). "The Sharing Economy: Why it Works and How to Join". Forbes. Retrieved March 31, 2017.
  40. ^ Ho, Ky Trang. . Forbes. Archived from the original on December 4, 2016. Retrieved 2017-03-31.
  41. ^ Nassauer, Sarah (2016-08-08). "Wal-Mart to Acquire Jet.com for $3.3 Billion in Cash, Stock". Wall Street Journal. ISSN 0099-9660. Retrieved 2017-03-31.
  42. ^ "Rise of the Unicorns". Zinnov Thoughts. 2015-08-27. Retrieved 2017-04-01.
  43. ^ "2030 Digital Compass: the European Way for the Digital Decade". European Commission. Retrieved 2022-12-12.
  44. ^ Kuckertz, Andreas; Scheu, Maximilian; Davidsson, Per (2023). "Chasing mythical creatures – A (not-so-sympathetic) critique of entrepreneurship's obsession with unicorn startups". Journal of Business Venturing Insights. 19 (Article e00365): e00365. doi:10.1016/j.jbvi.2022.e00365. S2CID 254432203.
  45. ^ Streitfeld, David (2023-01-23). "For Tech Companies, Years of Easy Money Yield to Hard Times". The New York Times. ISSN 0362-4331. Retrieved 2023-08-02.

External links

  • "The Complete List of Unicorn Companies". CB Insights.

August 25, 2023
unicorn, finance, business, unicorn, privately, held, startup, company, valued, over, billion, 1270, term, first, published, 2013, coined, venture, capitalist, aileen, choosing, mythical, animal, represent, statistical, rarity, such, successful, ventures, insi. In business a unicorn is a privately held startup company valued at over US 1 billion 1 1270 2 The term was first published in 2013 coined by venture capitalist Aileen Lee choosing the mythical animal to represent the statistical rarity of such successful ventures 3 4 5 6 CB Insights identified 1 170 unicorns worldwide as of June 2022 update 7 Unicorns with over 10 billion in valuation have been designated as decacorn companies 8 For private companies valued over 100 billion the terms centicorn and hectocorn have been used 9 Contents 1 History 2 Reasons for rapid growth of unicorns 2 1 Fast growing strategy 2 2 Company buyouts 2 3 Increase in private capital available 2 4 Prevent IPO 2 5 Technological advances 3 Valuation 3 1 Valuation of high growth companies 3 1 1 Market sizing 3 1 2 Estimation of finances 3 1 3 Valuation methods 4 Trends 4 1 Sharing economy 4 2 E commerce 4 3 Innovative business model 5 Criticism 6 2022 Unicorn Dismount 7 See also 8 References 9 External linksHistory EditAileen Lee originated the term unicorn in a 2013 TechCrunch article Welcome To The Unicorn Club Learning from Billion Dollar Startups 4 At the time 39 companies were identified as unicorns 10 In a different study done by Harvard Business Review it was determined that startups founded between 2012 and 2015 were growing in valuation twice as fast as startup companies founded between 2000 and 2003 11 In 2018 16 US companies became unicorns resulting in 119 private companies worldwide valued at 1 billion or more 12 Globally according to CB Insights there were more than 803 unicorns as of August 2021 update with ByteDance SpaceX and Stripe among the largest 13 and 30 decacorns including SpaceX Getir Goto J amp T Express Stripe and Klarna 13 The surge of unicorns was reported as meteoric for 2021 with 71 billion invested in 340 new companies a banner year for startups and for the US venture capital industry the unprecedented number of companies valued at more than 1 billion during 2021 exceeded the sum total of the five previous years 14 Six months later in June 2022 1 170 total unicorns were reported 15 More than 90 unicorns have been created by Israelis 16 Reasons for rapid growth of unicorns EditFast growing strategy Edit During the mid 2000s investors and venture capital firms were adopting first mover advantage and get big fast GBF strategies for startups also known by the neologism blitzscaling 17 GBF 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 18 The rapid returns through this strategy seem to be attractive to all parties involved despite the cautionary note of the dot com bubble of 2000 as well as a lack of long term sustainability in value creation of emerging companies of the Internet age 19 Company buyouts Edit Many unicorns were created through buyouts by large public companies In a low interest rate and slow growth environment many companies like Apple Meta and Google focus on acquisitions instead of focusing on capital expenditures and development of internal investment projects 20 Some large companies would rather bolster their businesses through buying out established technology and business models rather than creating it themselves Increase in private capital available Edit The average age of a technology company before it goes public is 11 years as opposed to an average life of 4 years back in 1999 21 This new dynamic stems from the increased amount of private capital available to unicorns and the passing of the US s Jumpstart Our Business Startups JOBS Act in 2012 which increased by a factor of four the number of shareholders a company can have before it has to disclose its financials publicly The amount of private capital invested in software companies has increased three fold from 2013 to 2015 22 Prevent IPO Edit Through 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 22 A few recent examples of this situation were Square best known for its mobile payments and financial services business and Trivago a popular German hotel search engine both of which were priced below their initial offer prices by the market 23 24 This was because of the severe over valuation of both companies in the private market by investors and venture capital firms The market did not agree with both companies valuations and therefore dropped the price of each stock from their initial IPO range Investors and startups may choose to avoid an IPO due to increased regulations Regulations like the Sarbanes Oxley Act have implemented more stringent regulations following several bankruptcy cases in the U S market that many of these companies want to avoid 20 Technological advances Edit Startups have capitalized on the rapid growth of new technology to obtain unicorn status With the advent 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 20 New innovations in technology including mobile smartphones P2P platforms and cloud computing with the combination of social media applications has aided in the growth of unicorns citation needed Valuation EditThe valuations that designate start up companies as unicorns and decacorns differ more established companies A valuation for an established company stems from past years performances while a start up company s valuation is derived from its growth opportunities and its expected development in the long term for its potential market 25 Valuations for unicorns usually result from funding rounds of large venture capital firms investing in a start up company Another significant final valuation of start ups is when a much larger company buys out a company giving it that valuation some examples are Unilever buying Dollar Shave Club 26 and Facebook buying Instagram 27 for 1 billion each effectively turning Dollar Shave Club and Instagram into unicorns Bill Gurley a partner at venture capital firm Benchmark predicted in March 2015 and earlier that the rapid increase in the number of unicorns may have moved into a world that is both speculative and unsustainable that will leave in its wake what he terms dead unicorns 28 29 30 Also he said that the main reason of unicorns valuation is the excessive amount of money available for them 31 Similarly in 2015 William Danoff who manages the Fidelity Contrafund said unicorns might be going to lose a bit of luster due to their more frequent occurrence and several cases of their stock price being devalued 32 Research by Stanford professors published in 2018 suggests that unicorns are overvalued by an average of 48 33 34 Valuation of high growth companies Edit For high growth companies looking for the highest valuations possible it comes down to potential and opportunity When investors of high growth companies are deciding on whether they should invest in a company or not they look for signs of a home run to make exponential returns on their investment along with the right personality that fits the company 35 To give such high valuations in funding rounds venture capital firms have to believe in the vision of both the entrepreneur and the company as a whole They have to believe the company can evolve from its unstable uncertain present standing into a company that can generate and sustain moderate growth in the future 25 Market sizing Edit To judge the potential future growth of a company there needs to be an in depth analysis of the target market 25 When a company or investor determines its market size there are a few steps they need to consider to figure out how large the market really is 36 Defining the sub segment of the market no company can target 100 market share also known as monopolization Top Down market sizing 37 Bottom Up analysis 37 Competitor analysisAfter the market is reasonably estimated a financial forecast can be made based on the size of the market and how much a company thinks it can grow in a certain time period Estimation of finances Edit To properly judge the valuation of a company after the revenue forecast is completed a forecast of the operating margin analysis of needed capital investments and return on invested capital needs to be completed to judge the growth and potential return to investors of a company 25 Assumptions of where a company can grow to needs to be realistic especially when trying to get venture capital firms to give the valuation a company wants Venture capitalists know the payout on their investment will not be realized for another five to ten years and they want to make sure from the start that financial forecasts are realistic 35 Valuation methods Edit With the financial forecasts set investors need to know what the company should be valued in the present day This is where more established valuation methods become more relevant This includes the three most common valuation methods 38 Discounted cash flow analysis Market comparable method Comparable transactionsInvestors can derive a final valuation from these methods and the amount of capital they offer for a percentage of equity within a company becomes the final valuation for a startup Competitor financials and past transactions also play an important part when providing a basis for valuing a startup and finding a correct valuation for these companies Trends EditSharing economy Edit The sharing economy also known as collaborative consumption or on demand economy is based on the concept of sharing personal resources This trend of sharing resources has made three of the top five largest unicorns Uber DiDi and Airbnb become the most valuable startups in the world The economic trends of the 2010s powered consumers to learn to be more conservative with spending and the sharing economy reflected this 39 E commerce Edit E commerce and the innovation of the online marketplace have been slowly taking over the needs for physical locations of store brands A prime example of this is the decline of malls within the United States the sales of which declined from 87 46 billion in 2005 to 60 65 billion in 2015 40 The emergence of e commerce companies like Amazon and Alibaba both unicorns before they went public has decreased the need for physical locations to buy consumer goods Many large corporations have seen this trend for a while and have tried to adapt to the e commerce trend Walmart in 2016 bought Jet com an American e commerce company for 3 3 billion to try to adapt to consumer preferences 41 Innovative business model Edit In support of the sharing economy unicorns and successful startups have built an operating model defined as network orchestrators 42 In this business model there is a network of peers creating value through interaction and sharing Network orchestrators may sell products services collaborate share reviews and build relations through their businesses Examples of network orchestrators include all sharing economy companies i e Uber Airbnb companies that let consumers share information i e TripAdvisor Yelp and peer to peer or business to person selling platforms i e Amazon Alibaba Criticism EditThe categorization of startups as unicorns has not been without criticism For example an economic policy focus on enabling more unicorns as the European Union is striving to do 43 threatens to lose sight of other societally desirable forms of entrepreneurship 44 Similarly the definition of unicorns is characterized as only superficially precise Additionally a focus on unicorns runs the risk of causing increased unethical behavior among entrepreneurs such as in the Theranos case 2022 Unicorn Dismount EditThis section possibly contains original research This section requires sourcesPlease improve it by verifying the claims made and adding inline citations Statements consisting only of original research should be removed August 2023 Learn how and when to remove this template message Many unicorns saw their valuations fall in 2022 as an result of an economic slowdown caused by the COVID 19 pandemic an increase in interest rates causing the cost of borrowing to grow 45 increased market volatility stricter regulatory scrutiny amp underperformance As a result many unicorns saw their valuations fall or were acquired by larger companies at lower prices than expected The pandemic had a significant impact on the global economy and many startups were negatively affected by the resulting slowdown in consumer spending and decreased investment The increased volatility in financial markets made it more difficult for startups to raise capital and also caused a decrease in their valuation With the rise of unicorns regulators began to pay more attention to these companies resulting in increased regulatory scrutiny and oversight As a result some unicorns faced legal and financial challenges lowering their valuation Intense competition an ability to scale quickly or mismanagement were common factors that caused unicorns to fail to meet investor expectations resulting in a lowered valuation See also EditList of unicorn startup companies List of venture capital firms First mover advantage Unicorn bubble Venture capital financingReferences Edit Hirst Scott Kastiel Kobi 2019 05 01 Corporate Governance by Index Exclusion Boston University Law Review 99 3 1229 Cristea Ioana A Cahan Eli M Ioannidis John P A April 2019 Stealth research Lack of peer reviewed evidence from healthcare unicorns European Journal of Clinical Investigation 49 4 e13072 doi 10 1111 eci 13072 ISSN 0014 2972 PMID 30690709 Rodriguez Salvador September 3 2015 The Real Reason Everyone Calls Billion Dollar Startups Unicorns International Business Times IBT Media Inc Retrieved January 3 2017 a b Lee Aileen 2013 Welcome To The Unicorn Club Learning From Billion Dollar Startups TechCrunch Retrieved 26 December 2015 39 companies belong to what we call the Unicorn Club by our definition U S based software companies started since 2003 and valued at over 1 billion by public or private market investors about 07 percent of venture backed consumer and enterprise software startups Griffith Erin amp Primack Dan 2015 The Age of Unicorns Fortune Retrieved 26 December 2015 Subtitle The billion dollar tech startup was supposed to be the stuff of myth Now they seem to be everywhere Chohan Usman 2016 It s Hard to Hate a Unicorn Until it Gores You The Conversation Retrieved 26 October 2016 The Complete List Of Unicorn Companies CB Insights Retrieved 2022 07 01 What Is A Decacorn The Era Of Decacorn Companies FourWeekMBA 2019 01 25 Retrieved 2021 08 29 Sheetz Michael 2019 01 25 Elon Musk s SpaceX hits 100 billion valuation after secondary share sale CNBC Retrieved 2022 07 01 Fan Jennifer S March 2016 Regulating Unicorns Disclosure and the New Private Economy BCL Rev 57 2 583 note 1 How Unicorns Grow Harvard Business Review January February 2016 pp 28 30 Retrieved 2017 03 30 Sumagaysay Levi October 9 2018 Venture capital Bay Area s Lucid Motors Zoox Uber scored the most in third quarter The Mercury News San Jose Calif Retrieved October 15 2018 a b The Global Unicorn Club CB Insights Retrieved 2021 07 01 Mathur Priyamvada January 6 2022 The meteoric rise of US unicorns in 2021 pitchbook com Retrieved July 3 2022 The Complete List Of Unicorn Companies CB Insights Retrieved 2022 07 04 Tech Leaders in Israel Wonder if It s Time to Leave New York Times Hackford Heidi January 11 2019 BLITZSCALING HOW SILICON VALLEY LEARNED TO GROW computerhistory org Retrieved 2022 07 03 Sterman J D Henderson R Beinhocker E D amp Newman L I 2007 Getting big too fast Strategic dynamics with increasing returns and bounded rationality Management Science 53 4 683 696 Porter Michael E March 2001 Strategy and the Internet Harvard Business Review 79 3 62 78 164 PMID 11246925 Retrieved 2022 07 03 a b c Howe Neil What s Feeding The Growth Of The Billion Dollar Unicorn Startups Forbes Retrieved 2017 03 30 To fly to fall to fly again The Economist 2015 07 25 ISSN 0013 0613 Retrieved 2017 03 30 a b Grow fast or die slow Why unicorns are staying private McKinsey amp Company Retrieved 2017 03 30 Demos Telis Driebusch Corrie 2015 11 19 Square s 9 a Share Price Deals Blow to IPO Market Wall Street Journal ISSN 0099 9660 Retrieved 2017 03 31 Balakrishnan Anita 2016 12 16 Trivago IPO opens at 11 20 after pricing at 11 below its expected range CNBC Retrieved 2017 03 31 a b c d Valuing high tech companies McKinsey amp Company Retrieved 2017 03 30 Unilever Buys Dollar Shave Club for 1 Billion Fortune Retrieved 2017 03 30 Raice Shayndi Ante Spencer E 2012 04 10 Insta Rich 1 Billion for Instagram Wall Street Journal ISSN 0099 9660 Retrieved 2017 03 30 Winkler Rolfe 2015 Bill Gurley Sees Silicon Valley on a Dangerous Path The Wall Street Journal Retrieved 26 December 2015 Subtitle Subtitle Venture capitalist says companies hurt themselves by trying to delay going public Blodget Henry 2008 Tech How To Survive Great Depression 2 0 Without Firing Everyone Business Insider Retrieved 26 December 2015 It seems every serious venture capital firm has now had a chat with its portfolio companies about how it s time to fire people VC extraordinaire Bill Gurley s Benchmark has had the same chat with its companies but Bill tells peHUB that there s actually an alternative to canning half your company Move to San Jose Griffith Erin 2015 Bill Gurley Predicts Dead Unicorns in Startup Land this Year Fortune Retrieved 26 December 2015 Subtitle A crash would affect more than just startups Bill Gurley the prominent investor behind Uber and Snapchat has been sounding the tech bubble alarm for months now He s preached about the dangerous appetite for risk in the market the alarmingly high burn rates and the excess of capital sloshing around in Silicon Valley There is no fear in Silicon Valley right now he said A complete absence of fear He added that more people are employed by money losing companies in Silicon Valley than ever before Will there be a crash I do think you ll see some dead unicorns this year he said using the term used to describe startups with valuations higher than 1 billion Rob Price 2018 Legendary investor Bill Gurley says that there s a systematic problem in Silicon Valley because it s too easy to get cash Business Insider Retrieved 12 March 2018 There s so much easy money in the tech industry entrepreneurs can afford not to be accountable to their investors That excessive amount of money he says can inflate a startup s valuation even if they don t deserve it Reuters 01 December 2015 Fidelity star Danoff grows cautious about unicorn phenomenon CNBC com accessed 31 Jan 2020 Gornall and Strebulaev 2018 Squaring Venture Capital Valuations with Reality Stanford University Working Paper SSRN 2955455 We develop a valuation model for venture capital backed companies and apply it to 135 U S unicorns private companies with reported valuations above 1 billion We value unicorns using financial terms from legal filings and find reported unicorn post money valuations average 48 above fair value with 13 being more than 100 above Sorkin Andrew 2017 How Valuable Is a Unicorn Maybe Not as Much as It Claims to Be New York Times Retrieved 11 March 2018 The average unicorn is worth half the headline price tag that is put out after each new valuation a b MacMillan I C Siegel R amp Narasimha P S 1985 Criteria used by venture capitalists to evaluate new venture proposals Journal of Business venturing 1 1 119 128 Zhuo Tx 2016 03 07 5 Strategies to Effectively Determine Your Market Size Entrepreneur Retrieved 2017 03 30 a b Market Sizing Is There A Market Size Formula B2B International B2B International Retrieved 2017 03 30 Valuation methods Venture Valuation www venturevaluation com Retrieved 2017 03 30 Newlands Murray July 17 2015 The Sharing Economy Why it Works and How to Join Forbes Retrieved March 31 2017 Ho Ky Trang How To Profit From The Death Of Malls In America Forbes Archived from the original on December 4 2016 Retrieved 2017 03 31 Nassauer Sarah 2016 08 08 Wal Mart to Acquire Jet com for 3 3 Billion in Cash Stock Wall Street Journal ISSN 0099 9660 Retrieved 2017 03 31 Rise of the Unicorns Zinnov Thoughts 2015 08 27 Retrieved 2017 04 01 2030 Digital Compass the European Way for the Digital Decade European Commission Retrieved 2022 12 12 Kuckertz Andreas Scheu Maximilian Davidsson Per 2023 Chasing mythical creatures A not so sympathetic critique of entrepreneurship s obsession with unicorn startups Journal of Business Venturing Insights 19 Article e00365 e00365 doi 10 1016 j jbvi 2022 e00365 S2CID 254432203 Streitfeld David 2023 01 23 For Tech Companies Years of Easy Money Yield to Hard Times The New York Times ISSN 0362 4331 Retrieved 2023 08 02 External links Edit The Complete List of Unicorn Companies CB Insights Retrieved from https en wikipedia org w index php title Unicorn finance amp oldid 1168342827, wikipedia, wiki, book, books, library,

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