Opinion

Billion dollar baby – ‘Unicorn’ turns five 🎈

Investment, Late Stage

Orla BrowneOrla Browne, November 2, 2018

On 2nd November 2013, the term ‘unicorn’ was used for the first time to describe a privately-owned tech company valued at over a billion dollars.

Coined five years ago by VC investor Aileen Lee in the TechCrunch article “Welcome To The Unicorn Club: Learning from Billion-Dollar Startups”, the term is no longer the preserve of tech titles and industry figures. These days you’ll see mention of unicorns pop up far beyond the trade press, on the BBC from time to time, in a Guardian feature here, and New York Times analysis there; and yes we’ve even been known to publish a few ourselves. Used to describe the sought-after startups that provide an investor enormous returns if captured young and in the wild, ‘unicorn’ became the perfect term to describe those rare mythical beasts of the startup world – the ones that make it.

These days the term itself is contrarily omnipresent, at once obsessed over and ridiculed. With the tech industry’s habit to ‘move fast and break things’, a lot’s changed in the last five years. Is the unicorn badge still fit for purpose, and are they really something we should be hunting?

A cool billion

Think back to the heady days of 2013; Blurred Lines was on the radio, Snowden was en route to Russia, the Harlem Shake was still a thing, and unicorns had yet to become synonymous with elaborate cakes and rainbow doughnuts. No, unicorns in 2013 were still a scarce species of tech company; according to Lee’s unicorn-zero article, the US had produced just 39 unicorns in the decade running up to 2013. The moniker worked so well, it was all that the community held dear. The incongruity had hipster* appeal, the rainbow sparkles at odds with the industry’s ‘bro’ image offered knowing irony, the creatures are suitably magical and random, and designers could have a field day.

These days there are over 260 companies valued at over $1bn worldwide who have yet to exit; a somewhat more common breed. In the five years to 2013 the UK produced eight companies valued over the magic mark, in the five years since, another 47 have been born. While the WWF would still consider them an endangered species, they’re making good headway.

A billion, so what?

With deal sizes for venture-backed startups on the rise, VCs increasingly need their portfolio companies to aim bigger than ‘just’ a billion dollars to recoup their fund’s capital. In the UK alone, median deal sizes grew from £0.68m in Q2 of 2013, to £3.02m in the same period of this year. In The Social Network when Justin Timberlake offered Zuck the sage advice that “a million dollars isn’t coolYou know what’s cool? A billion dollars.”, eyes rolled around the internet, and it earned instant meme treatment. If Sorkin were to update it for 2018, he might have to say two billion.

Peak unicorn

For a term so young, ‘unicorn’ receives a huge amount of backlash. Tech jargon that’s cool while niche and exclusionary becomes lame and clichéd once decoded by the real world. You won’t catch too much chat of unicorns at the co-working space summer party these days, though there may well be an ironic inflatable.

For an industry so based around raising progressively eye-watering investment rounds, there’s actually a bit of a taboo around valuation bragging. Many founders will be motivated by overarching goals to change the world, rather than only aiming for a valuation threshold. Whatever cute name you give big companies though, the ambition remains to build them. Entrepreneurs want to create world-changing businesses, and those have a happy habit of also making loads of money. Now that entrepreneurs have seen it done a few times, increasingly closer to home, they’ve got the belief to do it too.

Beyond billions

In a tech world that since 2013 has been burned by high-profile harassment headlines, opaque and nefarious election-swinging data use, with perceived untouchable power, the idea of a unicorn charging to irresponsible heights doesn’t quite capture the mood or PR ambitions of the industry like it once did.

Increasingly founders, consumers and investors are looking for more than just a dollar-denominated return on investment. The last half decade has seen a boom in Impact Investing from those looking to earn returns from socially and environmentally-minded projects. Purpose & Profit, or Tech for Good businesses are cutting through with their message that you don’t have to choose between doing good and making money, but that the two can go hand in hand towards building prosperous, sustainable high-growth businesses. For governments looking to boost domestic productivity, there should also be a real draw towards the ‘double bottom line’. 

Edinburgh-based fintech-for-good startup Sustainably, who joined the Tech Nation Fintech growth programme last month and won £130k at the WeWork Creator Awards pitch contest just last week, have built a for-profit business in the charity-giving space. They’ll connect to your bank card and round up the change from every purchase to give to charities of your choosing. They don’t take a cut of donations or charge the users, instead their SaaS model will see them charge businesses to match-donate with their customers and employees. With an estimated $6-10bn of unclaimed corporate match-donation right now, without even looking at the wider giving sector, there’s clearly money to be made in saving the world.

The world and the tech industry are very different places than they were five years ago, when countries were still joining the EU, and Uber was just a fun, interesting flag bearer for a new sharing economy. It’s easier than ever to conceive a tech company from anywhere in the world, but harder to raise one that’s well rounded. Now you can 3D print a unicorn, but it’s still one dimensional. It might not be quite time to kill the unicorn, but five years in, he’s looking a little tired.


* Another 2013 phenomenon.