There are big companies and Multinational companies, and then there are unicorn companies with a market valuation of more than $1 billion. No company attains the status of a unicorn without outside help, and this help typically comes in the form of funding. In the end, the investor looks to obtain a fair return on investment (ROI).
The latest reports suggest that, as of June 2022, there are a total of 1146 unicorns worldwide. More than half of the unicorns, as per reports, are headquartered in the United States. India stands at third place in the international unicorn ranking, followed by UK and Germany.
Furthermore, 2021 proved to be a fruitful year worldwide with a total tally of companies hitting 959 up from just 563 in 2020.
WHAT IS A UNICORN?
Any startup with a valuation of over $1 billion is termed a unicorn. The Founder of Cowboy Ventures, Aileen Lee coined the term ‘unicorn’ in 2013. Although every unicorn establishes itself uniquely in the market, the common features that one can find in every unicorn are:
- Every unicorn takes along technology. Their business model runs on technology.
- Every unicorn is a pioneer in its niche to establish itself different in the market.
- Every unicorn begins its journey by building a Minimum Viable Product (MVP) around the vision
- Any unicorn that is privately owned has greater chances of becoming a unicorn.
MAIN FACTORS BEHIND THE PHENOMENAL GROWTH
Two main factors that have contributed to the growth of unicorns are:
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Increase in Venture Capital Activity
Behind the creation of unicorns lies the increasing role of venture capital funding. Venture Capital, in simple terms, is a form of private equity and a type of financing that investors, investment banks, and other financial institutions provide to startup companies and other small businesses that are set to achieve long-term growth. Those who invest expect some equity of the company in exchange for capital. Such investments are considered risky but if invested in the right venture, they can give impressive returns.
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The Covid 19 pandemic
The interest rates dropped and the overall costs of investing decreased with the onset of the Covid 19 pandemic, which increased investment activity. Not only this, but it also led to increase in interest when it came to non-traditional investment methods that had the potential to offer larger returns.
Venture capital funding has been a common way for investors to invest in non-traditional ways. Experienced venture capitalists always look for startups with high growth potential, as their aim is to get most of their investments.
INDIA: THE THIRD RANK HOLDER
India currently has a total of 102 unicorns. Notably, 2021 was the best year for Indian startups. According to the Hurun India Future Unicorn List released by Hurun Research Institute in 2021, India is the third-largest startup ecosystem in the world.
In 2022, the valuation took a hit in April, however, the entry of two startups: Physics Wallah and Purplle in June has put an end to the unicorn crunch.
EMERGING TRENDS
Some trends are emerging in the market and are likely to make an impact in the 2030s. These trends represent high potential opportunities:
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A Boom In Health & Wellness Industry
Undoubtedly, Covid 19 has put a spotlight on the health and wellness industry as people throughout the world have become more self-aware of the importance of health. Since the pandemic has started, many telehealth unicorns are opening up. In the coming years, the biotech industry will also achieve remarkable success.
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Disruption In The Mobility Sector
Prior to the pandemic, unicorns in the mobility sector emerged, however, everything altered in the sector, setting off a worldwide economic crisis. The newly emerged industry in the mobility sector had to pivot to delivering food, essentials, and other products.
At the same time, food and grocery delivery companies rose to respond to the emerging needs of consumers. Having raised $12 billion between 2016 and 2019, delivery unicorns raised $16 billion in the pandemic. For instance, a popular unicorn, Uber Eats which started its operations in 2014, witnessed a huge spike in its sales.
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Expansion Of The EV Market
The global electric vehicle market has taken a leap forward and is poised to grow exponentially in the coming years. Although the industry has already achieved remarkable growth, the electric car industry predictions suggest that we’ve only just scratched the surface and a lot is still left. Global automakers are offering electric models. Energy storage companies, charging network providers, and lithium battery makers are also supporting the growth by scaling up industrial tech.
The birth of electric vehicles is just the first step in creating a new ecosystem that will not only engage the automotive sector but also take into account the energy, financial services, and logistics sector.
THE TROUBLE
When a company’s valuation goes beyond $1 billion, it simply means that a group of investors has invested in the startup with a belief that the company will earn profits. However, very few companies are able to achieve profits, leaving investors without any pot of gold. Therefore, it is important to invest wisely in any startup.
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