There was a time when their sight was a sensation: "Their fur is like that of the buffalo, and their feet are like elephants, and out of their forehead they grow a horn that is black and very thick," Marco Polo wrote about the unicorn , On Sumatra, the world traveler had allegedly spotted the mythical creature that people had raved about since antiquity.
In the financial world of 2019, the mystical horse is no longer so rare: As a "unicorn" in the industry slang is called a start-up that is rated at least a billion dollars without being listed on the stock market. When Aileen Lee of venture capitalist Cowboy Ventures invented the term "unicorns" in 2013, there were 18 to 39 rare specimens worldwide, depending on the exact definition. Lee's list included names such as Facebook, Twitter and LinkedIn.
Today, ten times as many start-up companies fall into this category. The consulting firm CB Insights currently counts just under 400 unicorns. Within a month more than a dozen have been added.
Part still not earned a cent
ZUMA Press / imago images
Food bags from the supplier DoorDash (archive image): Estimated value at nearly 13 billion dollars
The unicorns are not only multiplying rapidly, they are getting fatter, too. The letting portal Airbnb, which will go public in 2020, is being valued by investors at more than $ 30 billion. Such breathtaking sums of money for start-ups who, unlike Airbnb, have not made a penny profit, are no exception.
The unicorns are increasingly displaced by the relationship of the "ten horns", which are valued at least ten billion dollars. For example comes
- Elon Musks SpaceX spacecraft at $ 18.5 billion,
- the food supplier Door Dash to 12.6 billion dollars,
- the e-cigarette maker Juul Labs at $ 50 billion (at least before the recent negative news),
- the computer game developer Epic Games (Fortnite) on 15 billion dollars,
- the office space provider WeWork at $ 47 billion (subject to the latest developments),
- The online payment service Stripe to $ 22.5 billion.
- At the top of the list, however, are currently two Chinese start-ups, the Internet company Bytedance with $ 75 billion and
- the car dealer Didi Chuxing with 56 billion dollars.
By comparison, when Amazon went public in 1997, Jeff Bezos's garage company was valued at under $ 400 million.
Insiders are already discussing how to categorize the $ 100 billion horse galloping through the private equity landscape in the near future: as Centacorn (Hunderthorn)? Or Hectocorn?
That the numbers with the many zeros are not always worth the paper they stand on, the case of WeWork has shown. When the IPO was due, the investors looked closer for the first time - and quartered the sum. Even with Juul, the air could soon escape or have already escaped in the face of the debate about health risks.
Drew Angerer / AFP
WeWork office in New York: sum quartered
Some unicorns become horses
For the unicorns that are no longer there is already a word: "Undercorns". Alex Wilhelm, the editor-in-chief of the sectoral postal service "Crunchbase News", judges even more soberly: If a unicorn is a horse with a horn, then it is just a horse without a horn.
For the investors' favorites Uber and Lyft, however, the rude awakening did not come until the morning after the IPO: they flopped. Snapchat, Dropbox and Spotify also disappointed investors. The funders of the first hour, however, earn the "exit" from the Unicorns often still a golden nose on their investments.
And that's what gets many observers excited. It's upsetting that start-ups are increasingly home-based in the world of venture capital rather than pushing the stock market. According to McKinsey, the number of equity-backed companies in the US has doubled within a decade to 8,000 - while the number of listed companies simultaneously declined 16 percent to 4,300. Not even 200 companies dared to take the first note last year.
Too much money in the market
This trend is unlikely to change much. It's just too much money on the way. The low interest rate policy has ensured that more and more investor groups are investing in the venture capital market to hunt for returns and growth potential. In 2018, the industry posted a record $ 130 billion. Companies such as Uber are being forced by the money overflow to constant expansion into new regions and business areas. The funds to get them free house.
It saves the start-ups from having to deal with nagging analysts, shortsellers, and changing whims of the public on the stock market. Many of the companies are also horrified by the high bureaucratic requirements and the need for transparency. And the legislator has contributed to a move away from traditional financing. In 2012, for example, he deleted a requirement that forced start-ups with more than 500 shareholders to go public. The opportunity to grow outside the regulated stock market should actually be the exception, says law professor Elisabeth de Fontenay from Duke University. But: "You can say that the exception has since swallowed the rule."
The US Securities and Exchange Commission is worried about retail investors
At a recent congressional hearing, policymakers recently discussed what to do. As corporate value creation is increasingly in the sphere of venture capital, "workers are cut off from the value of their work," complained Rep. Patrick McHenry. Because small investors are not allowed to invest directly in start-ups. The company has ruled that "if you're not a wealthy retail investor, you're stupid," McHenry criticizes the provision that should serve consumer protection. The Securities and Exchange Commission has announced that it will review the "once again" requirement. The lack of IPOs and the lack of retail access to the private market is "a growing concern," says SEC CEO Jay Clayton.
However, De Fontenay believes it is a legend that retail investors "miss" the investment opportunities. On average, they would do better on the stock exchanges, she says - if only because they, unlike large investors, would not have the power to force start-ups to provide information about their financial position. The professor warns against "reproaching the wolves in the over-the-counter market" for Americans and their money-savers.
Maybe she has at least read Marco Polo. The unicorn has a head like a wild boar and tends to be down to earth, writes the Venetian in his book "The Wonders of the World". The animal likes to stay in the mud and in the mud. "To look at it is very ugly."