The unicorns of my childhood were mythical, rare and wonderful beasts. Today’s unicorns are young companies that have a valuation of 1 billion USD. That might sound like something rare and wonderful, but Venture Beat magazine lists hundreds of them, with Uber leading the list in terms of valuation. Most of the companies rely on digital technology in their business model, without it their business could not scale.
So where did the term come from?
A Techcrunch article in 2013 reported on 39 companies that had been founded in the previous ten years and were valued at more than 1 billion USD. Unicorns were rare, representing 0.07% of internet related companies funded per year.
Aileen Lee, the woman behind the Techcrunch article and who is credited with coining the term, sees that the rise in unicorns may have peaked for this wave of technologies.
But what do the companies make that is so wonderful? Most exploit the possibilities of “platform economics“, rather than make something, these companies connect supply with demand. Think of airbnb which is in the lodging services business without owning a single bedroom. Rather than building hotels and then selling those rooms to guests, airbnb offers a platform for the supply side (people with spare rooms) to offer accommodation directly to the demand (visitors to the city). These platforms are often said, in approving tones, to be “disruptive”, meaning that they change an existing industry. In many cases regulators have stepped in to limit that change, for example Amsterdam City Council limits the time allowable for rent to two months per year.
We look set to have continued disruption, and while a few experts are predicting dead unicorns on the horizon it seems we’ll see a growing number of unicorns, decacorn (companies valued at more than 10 billion) and hectacorns (companies valued at over 100 billion) for a while yet. Perhaps we are, as Fortune magazine suggest finally in the age of the unicorns.