Interest is growing in start-ups that are causing disruption in all areas of business. These so-called unicorns (companies valued at over 1 billion USD) are impacting the lives of millions of people, as well as generating revenues comparable to the GDP of countries in a the short time span of just a few years, really just few years (averaging 1.6 years).
In this article, we present a current global scenario of unicorn companies (valued at over US $ 1 billion dollars) and venture capital funds associated to them. We analyzed the data using Data Analytics and Artificial Intelligence methodologies to find out relevant patterns on the subject, such as: the marginalization of Latin American countries in this market, the decentralization of the investment and innovation market caused by Asian initiatives, specially China, and the composition of groups with similar business and performance characteristics in general terms.
O que vou encontrar neste artigo?
- Venture Capitalists
- Investment Funds
- Tech Entrepreneurs
- Macroeconomists and strategists
- How are the 217 unicorns cataloged and their relationships with global investment funds characterized?
- What are the main the investment funds and their strategic behavior on the market?
- Which Investors are most appropriate for each sector and how are they distributed geographically?
- What are the ultra-unicorns?
- What is the average distance in kilometers between investors and companies in the US and China?
- What is the correlation of the physical presence of funds with unicorns?
- How does the polarization of the creation of unicorns take place between the West and the East?
What are unicorn companies?
Unicorn companies are Tech-based startups with a valuation above $ 1 billion worth, even before they are publicly traded. In November 2017, the total value of unicorn startups in the world corresponds to US $ 753 billion (42% of Brazil’s GDP). US $ 383 billion are from the US companies while US $ 253 billion from Chinese companies, which combined correspond to 84.4% of the total!
We collected the data sample published by the market research firm CBIsinghts with the following raw information:
- 217 start unicorns with market value greater than 1 billion US dollars and with the time of the first investment “series A” less than 10 years.
- 312 investment funds with at least one investment in one of the 217 companies.
- 34 business sectors.
- 22 countries.
Note: We execute several “cognitive capoeira”, which is the way we call data wrangling creative processes for the dataset enrichment and field validation. We simplify the number of categories as much as possible. We verified all the geographical positions and realized that some unicorn companies, mainly Chinese, were associated with the generic geographical coordinates due to the difficulties in language translation (or address translation) or they have migrated their offices to other locations. We focused on the place of origin of each.
Rankings of unicorn and georeferenced analyzes
Business scenarios for unicorn startups created by VORTX
The business scenarios encountered by VORTX artificial intelligence were named according to the most striking features from the point of view of Aquarela Analysts team.
Most unicorn startups
Group 1 – Annual Billion
They are the most typical companies and correspond to 50% of the 217 analysed companies. They present Valuations of 2 billion in two years, of which we have the following configuration of sectors:
(26.09%) | eCommerce / Marketplace
(16.05%) | Fintech
(13.38%) | Software & Services
(10.03%) | Healthtech
(6.69%) | big data
(6.02%) | On demand
(5.69%) | Social
(5.02%) | Media
(3.68%) | Hardware
(3.34%) | Cyber Security
The main investors related to these companies are:
(4.35%) | Sequoia Capital
(3.01%) | Accel Partners
(2.68%) | GGV Capital
(2.34%) | SV Angel
(2.01%) | New Enterprise Associates
(2.01%) | Index Ventures
(1.67%) | Founders Fund
(1.67%) | Insight Venture Partners
(1.67%) | Alibaba Group
(1.67%) | Khosla Ventures
Group 2 – Explosives
Companies that correspond 38.82% of the base and present an average valuation of 2 billion with extremely short life time with average age under one year. The main sectors of these companies are:
(9.52%) | Fintech
(9.52%) | Software & Services
(8.23%) | On demand
(7.36%) | Healthtech
(6.93%) | Education
(5.19%) | Cyber Security
(5.19%) | Real Estate Management
(4.33%) | Social
(4.33%) | eCommerce / Marketplace
(3.90%) | Travel-TravelTech
Top 10 Investors
(2.60%) | Warburg pincus
(2.60%) | Sequoia Capital China
(2.16%) | Khosla Ventures
(2.16%) | Goldman Sachs
(2.16%) | Tencent Holdings
(1.73%) | Google Ventures
(1.73%) | Tencent
(1.73%) | Sequoia Capital
(1.30%) | QiMing Venture Partners
(1.30%) | Temasek Holdings
Group 3 – Designers
Companies with an average valuation of 4.6 billion and an average of 4.5 years with the following main industries:
(28.95%) | Software & Services
(23.68%) | eCommerce / Marketplace
(18.42%) | Cyber Security
(7.89%) | Fintech
(7.89%) | Social
(5.26%) | Media
(5.26%) | Big Data
(2.63%) | Clothing and Accessories
Top 10 Investors in This Group
(5.26%) | Accel Partners
(5.26%) | Andreessen Horowitz
(5.26%) | Temasek Holdings
(5.26%) | Technology Crossover Ventures
(5.26%) | Sequoia Capital
(5.26%) | General Atlantic
(5.26%) | SoftBank Group
(2.63%) | Firstmark Capital
(2.63%) | Ceyuan Ventures
(2.63%) | Polaris Partners
From group 4 onwards, we consider companies “ultra-unicorns” which are the exceptions (or outliers) within the dataset.
Group 4 – Data-Driven
They are US companies in the areas of eCommerce, Marketplace and Big Data, with an average valuation of $ 24.64 billion and average age of 6 years. The only two companies were Airbnb and Palantir and the investors were:
Top 10 Investors
(16.67%) | Founders Fund
(16.67%) | RRE Ventures
(16.67%) | ENIAC Ventures
(16.67%) | In-Q-Tel
(16.67%) | General Catalyst Partners
(16.67%) | Andreessen Horowitz
Group 5 – Logistics
Companies in general of the logistics area, with an average valuation of 20 billion dollars and age of 3.5 years. The top industries in this group are Supply Chain and Logistics, and Facilities.
Top 10 Investors
(16.67%) | Rothenberg Ventures
(16.67%) | Founders Fund
(16.67%) | T. Rowe Price
(16.67%) | SoftBank Group
(16.67%) | Draper Fisher Jurvetson
(16.67%) | Benchmark Capital
Group 6 – Uber
With $ 68 billion valuation, Uber gained a scenario just for itself according to VORTX. An interesting case of and outlier among already outlier companies. Belonging to the on-demand industry category, key investors are:
- Lowercase Capital
- Google Ventures
- Benchmark Capital
Group 7 – Chinese Uber
With a gigantic market to explore, China has a Uber-like company that is very strong in its local market and has a valuation of $ 50 billion in just 2 years from birth. The company is called Didi Chuxing. The main investors are:
- Softbank Corp.
- Tiger Global Management
- Matrix Partners
Group 8 – Chinese Hardware
Xiaomi, with valuation of $ 46 billion and 5 years in the area of hardware with key investors:
- QiMing Venture Partners
- Digital Sky Technologies
- Qualcomm Ventures
Group 9 – China Internet Plus
China Internet Plus, with a valuation of $ 30 billion in 1 year in the area of eCommerce / Marketplace. Key Investors:
- Global DST
- Trustbridge Partners
- Capital Today
Group 10 – Green Industry
Bloom Energy, with valuation of $ 2.7 billion over 8 years in the clean industry area. Key Investors:
- Kleiner Perkins Caufield & Byers
- ATEL Ventures
- DAG Ventures
The displacement of the American axis of startups unicorns
Although we see that most unicorns startups originate in North America, other points, such as Europe and especially Asia, began to gain strength in this market. The following gif file shows the mean of the unicorns’ geographic coordinates(latitude/Longitude) over the last 5 years (2012-2017) as well as the investors. It is possible to see how the axis has distanced itself from the United States, by the strong Asian movement! The trend also continues to be on the northern hemisphere.
The regional average of distances from venture capital funds (also called venture capital funds) presents relevant information in absolute terms: most investors are in the United States, but the center point of this axis is shifting to the right, so as the central point of the unicorns, which is already approaching Europe. Initiatives in the southern hemisphere are proportionately so low that they do not allow the points to be shifted to the central axis of the map. Only 3 funds are below the equator.
China’s presence in the global market for startups is staggering, featuring more and more ultra-unicorn companies. Moreover, the Chinese strategy apparently aims to create equivalent solutions of the American market, using its domestic economy and its cultural challenges faced by foreign companies to adapt to the solutions and different languages and cultures of Chinese civilization. India presents more startups and investors, also contributing to the shift of the American axis.
In contrast, in Brazil there are no companies or investment funds listed in the ranking, until now. Although the country is one of the largest economies in the world, the large-scale technologies used in the country are traditionally American. Late entry into these new markets may represent something similar to the late entry into the industrial age, but on a much shorter time scale. The operating time of the unicorn companies is really very short, average 1.64 years. South Americans need to be aware of global movements.
Uber, the absolute leader, presents a model so innovative that it generates business advantages that are not restricted only to taxi drivers, but also to the technology industry, since its information service does not generate the invoice issuance at least in Brazil. Also the information of human flows in key strategical cities of the world allows UBER to extract a series of Big Data Analytics opportunities to commercialize this knowledge, and also serve as a competitive differential to the allied investment funds.
With the VORTX scenario discovery analytics, it becomes possible not only to understand the points outside the curve, but also to help entrepreneurs and investment funds choose the sectors and partner profiles that best fit the reality of each business. Also, taking the average investment geographic distance from each fund, it is possible to infer if there are greater or lesser chances of investing in a company that could become a startup unicorn.
More than half of these companies are based in the United States, followed by China which, in turn, is gaining a lot of space on the international scene, although very little is heard about these companies outside China.
We hope this report can assist mid/long-term investors and entrepreneurs. For any questions of comments, just let us know.
Founder of Aquarela and Director of Digital Expansion, Master in Business Information Technology at University of Twente – The Netherlands. Professor and lecturer in the area of Data Science, specialist in intelligence systems architecture and new business development for industry.
Doctor and Master of Business Administration in Finance. Specialist in financial econometrics, behavioral finance, quantitative methods and capital markets.
Data scientist at Aquarela. Materials engineering graduated, programming enthusiast by doing analysis in R and Python, learned through self-taught methods about statistical algorithms implementation and application.