Photo: Unicorns are now spread across five continents. Credit: Unplash.
By Sergio López García
Unicorns were very rare to find, however, they suddenly seem to be everywhere. Some people consider that this species with a mythological name and characteristics does not exist and dismiss stories about them as fictional, but since Ailen Lee, investor and leader of the venture capital firm Cowboy Ventures, used the term 'unicorn' to describe a specific type of innovative technology startups in an article published in TechCrunch in 2013, unicorns have become a reality of our world.
In his article, Lee defined unicorns as technology startups valued at more than $1 billion valuation prior to going public and shared a number of mythological traits, such as being based on a disruptive technology that tapped into new business opportunities or their ability to grow at breakneck speed with an international focus. The ultimate dream of a startup would be to become one of these quirks.
The first list of this analyst and investor included 39 companies and among them were many that today are no longer unicorns, such as Facebook or AirBNB, since the first rule of the Unicorn Club is that the moment a startup goes public, it ceases to be a unicorn. All these companies were based in the US, especially on the West Coast. Silicon Valley seemed to be the only breeding ground for unicorns.
"The article in which Aileen Lee created this definition argued that less than 0.1% of the companies in which venture capital funds invested reached $1 billion in market valuation. So she decided to use the term 'unicorn' to describe these startups because it alluded to something rare or unreal," recalls Anthony Delmotte, Project Leader of Market Intelligence at Opinno.
In just over eight years, however, this list has grown considerably, to more than 25-fold. The list of unicorn companies compiled by CB Insights surpassed 1,000 worldwide last February. The United States has remained overwhelmingly dominant, but it is no longer the only ecosystem where these fast-growing, billion-dollar startups are emerging.
What's more: unicorns have become a source of national pride for some countries. French President Emmanuel Macron earlier this year placed "the 25 French unicorns" as the spearhead of his 'Start-Up Nation' innovative economy strategy in a speech in which he congratulated the French tech and entrepreneurial ecosystem for reaching this figure.
"By starting from a quantitative indicator (the $1 billion valuation), the unicorn concept works well as a benchmark to highlight the success stories of an entrepreneurial ecosystem and can even be used as levers of political communication, to highlight the dynamism of an economy," explains Delmotte, referring to the French case.
Southern Europe and Latin America, lagging behind
The main unicorn ecosystem challenging the U.S. remains China, with 166 such companies representing just under 17% of the global market. In fact, the largest unicorn in the global market at the moment is a company from this country, Bytedance, specializing in artificial intelligence, with a value of €127 billion. The rest of Asia, excluding China, accounts for 14% of the unicorns, almost half of them in India. Europe, with 12.8%; Latin America, with 2.6% or Africa, with 0.4%, are behind in the list, according to CB Insights data.
Within Europe, the northern countries have more of these companies than those in the south. Spain has four (Jobandtalent, Cabify, TravelPerk and Copado) and Italy only has the recent incorporation of Scalapay. In Latin America, Brazil is the country with the largest presence of this type (15 startups on the CB Insights list), followed by Mexico, with six. In Colombia there are two, in Chile, another two and in Argentina, one.
According to Delmotte, the differences between countries can be explained at both the macroeconomic and micro levels. "The countries with the most unicorns tend to be those that combine factors such as ambitious programs to support the entrepreneurial ecosystem, taxation and regulations favorable to the development and scaling of these startups, sufficiently trained human capital and connection between the academic sector and the private sector," explains this expert, who also highlights the need for structures to support the development of innovation projects (accelerators, incubators, venture builders, pilot programs of large corporations) and the importance of venture capital (business angels, financial agents of venture capital and the ability to attract investment).
At a microeconomic level, cultural factors in each country also seem to have some influence. However, Delmotte stresses that, beyond the differences, the market trends that favor the development of unicorns - online commerce technologies, sharing and other innovative models - "are global and can occur in any market."
Delmotte is critical of automatism in using unicorns as the sole indicator of a healthy innovative ecosystem. "To properly understand the evolution of the startup ecosystem, this approach is not enough. We could criticize it in the same way that we criticize GDP as an indicator for assessing the global economy." Delmotte points out that, by prioritizing growth over profitability, this business model can be quite detrimental for a large majority of entrepreneurs: "This race towards hyper-growth, in constant need of new capital, is almost never compatible with profitability".
Therefore, the entrepreneurship ecosystem could be assessed through other indicators, such as job creation, dynamism in creating new startups, the generation of tangible and intangible assets or the reduction of carbon footprint. Precisely, sustainability and energy transformation are the main opportunities for Spain and other countries that do not yet stand out in the rankings of unicorns to boost their innovative ecosystem, as detailed in the Genewin report, promoted by Opinno, together with Endeavor, Fundación Transforma España, Lanzadera, Telefónica Open Future, South Summit and Barcelona TechCity.
The business opportunities offered by the green transition have made the so-called 'sustainable unicorns' a subspecies in their own right. Clean energy and climate-related companies made up the group of unicorns that raised the largest volume of funding between 2017 and 2021. According to the State of European Innovative Companies report by venture capital fund Atomic, 24% of the money invested in unicorns during this period was in companies where sustainability was part of their business model.
One of the paradigmatic cases is the American company Uplight. This energy optimization software company - on the list of unicorns for just over a year - helped U.S. households save 354 million euros on their electricity bills and avoided the emission of 1.2 million tons of CO2.
This boom in sustainable unicorns is in line with the restructuring already being planned by various industries, such as the automotive industry, to adapt to the legislative changes proposed by governments around the world - especially ambitious in Europe - to reduce CO2 emissions.
This new industrial restructuring creates enormous business opportunities, in line with the Genewin report. In fact, Larry Fink, CEO of BlackRock, the world's largest asset management firm, said a few months ago that there has never been so much money available for companies dedicated to decarbonizing the planet.
Fink's words are very clear: "The next 1,000 unicorns will not be search engines or social networks, but sustainable and scalable companies; startups that will contribute to the decarbonization of the world and bring the energy transition within reach of all consumers".