May 24, 2022

Venture Capital: How The World Reached 1,000 Unicorns

Russ Zalatimo
Written by: Russ Zalatimo
Pre IPO, Venture Capital

Venture Capital: Unicorns

 

 

Yes, you read the title correctly. The world is at 1,000 unicorn companies as of 2022.

Of course, the term refers to a privately held startup company that has reached $1 billion in valuation. You know some of the major players in the space, like Instacart, Canva and SpaceX.

The term was originally coined in 2013, but back then, unicorns weren’t nearly as common as they were before 2020 and 2021, when the Covid-19 pandemic began.

Venture capital investment activity during the pandemic has led to a substantial increase in their numbers. But how did we get to 1,000 unicorns?

Let’s take a closer look.

 

The Unicorn Population Before The Boom

In 2021, there were 340 startup businesses that reached unicorn status. According to recent research, that’s more unicorns than in the previous five years combined.

Two main factors—increased venture capital activity and the pandemic—have contributed to this growth in unicorns.

 

How Venture Capital Creates Unicorns

Venture capital funding is largely responsible for the creation of unicorns. The term venture capital (VC) refers to capital that is raised by startup companies and generally comes in the form of financial, technical or managerial assistance.

Funding for VC usually comes from individual investors, investor groups, investment banks or other financial institutions. Investors typically expect some equity in exchange for capital. Startup owners need to consider the risk or disadvantages of selling shares of the company to a venture capitalist.

 

Other Factors That Bred Today’s Number Of Unicorns

Other factors have played a role in the influx of unicorns, with the pandemic being at the forefront. The Covid-19 pandemic contributed to interest rates dropping and the overall costs of investing decreased as a result. Because of this, not only has there been an increase in investment activity in general, but there’s also been an increase in interest when it comes to non-traditional investment methods that could potentially offer larger returns.

Venture capital funding has been a common way for investors to invest in non-traditional ways. To get the most out of their investments, experienced venture capitalists look for startup companies that have the most growth potential.

 

Today’s Unicorn Population: Industries, Geographies And Value Distribution

Overall, it was the combination of the low-interest rates and high venture capital investment activity in 2020 and 2021 that led to the growth of these $1 billion-plus private companies.

The three industries with the most unicorns are:

• Finance and insurance;

• Technology and telecommunications;

• Transportation and logistics.

Many of the product offerings at unicorn companies include software or an application. The U.S. is home to the majority of unicorns and China has the second-largest number of unicorns, as of 2021. In the U.S., most unicorns are located in California, with New York coming in second.

 

Recently Created Unicorns

The 2020 and 2021 unicorn boom has resulted in many new unicorns being minted.

Here are five recently minted unicorns, including where their funding came from and their growth outlook.

 

Miro (Internet software and services): Miro is a project management software and virtual whiteboard. With many companies still working remotely, collaboration software like Miro is a necessity. It currently has a $17.5 billion valuation and funding primarily came from three sources: Accel, AltalR Capital and Technology Crossover Ventures.

 

Gemini (Fintech): Gemini is software that makes it easy to trade cryptocurrency. Gemini was minted in late 2021 and continues to grow as cryptocurrency continues to gain popularity among investors. It currently has a valuation of $7.1 billion as of 2021. Funding has primarily come from Morgan Creek Digital, Marcy Venture Partners and 10T Fund.

 

RELEX Solutions (Supply chain and logistics): RELEX offers AI solutions to retail companies across the world. The company is a forerunner in the retail optimization space. It was just minted as a unicorn in February of this year and is valued at $5.7 billion as of early 2022. Sources of funding include Blackstone, Technology Crossover Ventures and Summit Partners.

 

Noom (Health): Noom is a software platform that uses science to help people get in control of their physical and mental health. It continues to gain traction as more people learn about its benefits. Noom was minted as a unicorn in 2021 and was valued at $3.7 billion in the same year. Funding for Noom has come from Qualcomm Ventures, Samsung Ventures and Silver Lake.

 

Flink (eCommerce): Flink is a German-based grocery delivery service. The demand for grocery delivery has grown significantly since the pandemic began. Flink is valued at $2.85 billion as of 2021 and received funding from Mubadala Capital, Bond and Prosus Venture.

These are just five of the hundreds of unicorns minted in the last two years.

 

Looking Ahead To A Post-Pandemic Economy

 

While it’s been incredible to see the boom in unicorns in the last two years, this growth is not expected to last. Many companies, especially in the tech sector, that receive unicorn status have been overvalued, which leads to venture capitalists losing out on the returns they originally anticipated. In fact, it’s estimated that 1 in 10 unicorns is overvalued. Once the companies go public, their values are made more transparent.

 

 

 

Read more:https://www.forbes.com/sites/forbesfinancecouncil/2022/05/19/venture-capital-how-the-world-reached-1000-unicorns/?sh=7e4b731846c5

 

 

The information herein has been obtained from sources believed to be reliable, but we do not guarantee its accuracy or completeness. The views and opinions expressed in this article are those of the author and do not necessarily reflect those of National Securities Corporation.
This is for informational and educational purposes only and should not be construed as investment advice or an offer or solicitation of any products or services. Opinions are subject to change with market conditions. The views and strategies may not be suitable for all investors and are not intended to be relied on for legal or tax advice. None of the information provided should be regarded as a suggestion to engage in or refrain from any investment-related course of action as neither National Securities nor its affiliates are undertaking to provide you with investment advice or recommendations of any kind. Please note that any investment involves risk, including loss of principal. Securities offered through National Securities Corporation, Member FINRA/SIPC.
Investing in Pre-IPOs

Free Whitepaper

Investing in Pre-IPOs

Download Now!
investment solutions

We’ll find the right investment solutions to meet your financial goals

Get Started
or call us toll free at 888-544-5244