The Future of Unicorns

Unicorn is a term that was coined in 2000s to refer to start-up companies with a valuation of $1billion-plus without an established performance record. This can be a stock market valuation or an estimation from venture capitalists. The term was initially popularised by Aileen Lee, a venture capitalist and founder of the seed stage venture capital fund CowboyVC, in an article looking at software start-ups founded since the turn of the millennium. In the article Lee noted that less than 1% (0.7%) of technology start-ups reached a $1billion valuation, making them as hard to find as the legendary unicorn. The term has now become widely recognised within the technology sector, including mobile and information technology. Professionals working with new start-ups and venture capitalists such as Namibian financial lawyer Henner Diekmann could well see a wholly different landscape in the coming months and years to that which was expected.  


Embed This Graphic On Your Site: <img src="https://s-media-cache-ak0.pinimg.com/originals/a5/fe/a8/a5fea86c11af4d24788fdb9e4e579a8d.jpg" width='540'><br /><a href='http://hennerdiekmann.blogspot.com/2016/08/the-future-of-unicorns.html '><br /></a></p> <br /> <p> Startups: The “Unicorns” [Infographic]</a></p> <br /> <p> </a>
This April, a blog post from another venture capitalist Bill Gurley called into question the future of unicorns, stating that a lot of these companies are now facing limited options. Essentially, too many businesses have taken too much money based on valuations that are unsupportable. Venture capitalists keen not to miss out on backing potential unicorns may have basically abandoned traditional risk analysis in order to acquire shareholder positions. These companies are now in a position whereby raising further funding from the private markets is virtually impossible, as the previous round of funding came with large caveats to protect these late-stage investors. On top of this, the numbers are not yet good enough for these firms to go public. Founders of unicorns are now beginning to face the consequences of this investment bubble, with many venture capitalists withdrawing support or demanding cut-backs on expenses, including staff, among other things.  



Despite this economic downturn for tech companies in Silicon Valley and beyond, there are still many unicorns in existence, as shown in the attached short video. In the post to follow you will find a list of some of the biggest unicorns to emerge over the past few years and be able to read some of the predictions made by venture capitalists as to the future of fast-growing start-ups.