The 5 Argentine companies that are profiled to enter the club of unicorns

Damien Kantor

08/02/2020 - 1:00

• Clarín.com
• Economy

The Argentine unicorns club is expanding. The 4 pioneers to reach a valuation of US $ 1 billion (Mercado Libre, Globant, Despegar and OLX) were joined last year by Auth0, but there are 5 other firm candidates to qualify as a unicorn . In 2019, 91 startups captured record investments of $ 403 million , but 93% of the total were concentrated in Ualá, Auth0, Satellogic, Agrofy and Technisys , which received funds of $ 376 million. However, there is another that grows to staggering levels without funding . This is Etermax, the creative firm of Asked, one of the most successful mobile games in history.

The Argentine entrepreneurial ecosystem matures. Above all, due to the emergence of private investors , who finance promising projects with a global vocation and rapid growth. Strictly speaking, only a select minority manages to overcome crises, climb stages and position themselves as a unicorn. This is what Auth0 achieved. In 2014, it received an injection of US $ 2.4 million from the Bessemer Venture Partners fund. To date, it has already raised US $ 332 million, which raised its valuation to the figure of US $ 2 billion .

The company created by Matías Woloski and Eugenio Pace develops authentication technologies for companies. This infrastructure replaces the nightmare of using passwords to access systems for employed customers. Auth0 managed to  add more than 11,000 clients to date , including Siemens, Naranj Card and the Wall Street Journal . They not only innovated with the product but also with the recruitment of talent. " Half of the employees work remotely from 35 different countries ," Woloski told Economics .

The businessman is 39 years old and is a computer engineer graduated from the UBA; his partner, Pace, is also an engineer but in electronics and trained at ITBA. Auth0 has income, but it is not yet profitable , something common with new ventures. So much so that three weeks ago, Salesforce Venture invested US $ 120 million , after analyzing the business model, its balance sheets and the possibilities to scale globally. “Startups take many years to obtain profitability. When Facebook went public (in 2011) it was still not making a profit, ”argued Luis Bermejo, from the Alaya Capital fund.

Financing is key for startups. It is the previous instance that could lead to the arrival on the New York Stock Exchange, a route that Mercado Libre, Globant and Despegar have already traveled, in that order. But not everyone aspires to that. " We are prepared and we have the muscles developed for that , but the most interesting challenge today is the product and the impact it can generate in high technology," said Woloski.

Beyond its symbolic meaning, reaching the rank of unicorn is an unquestionable achievement. The concept was first proposed by Aileen Lee in 2013 , when she chaired the Cowboy Ventures fund. Thus she referred to very young companies that grew very fast. But in 1979, MIT economist David Birch used animal names to classify companies based on their ability to create jobs: elephants (large corporations), mice (those that are small and cannot or cannot grow), and gazelles: those that are barely born and grow at surprising rates. Like a unicorn.

Ualá is a fintech that could qualify as a unicorn and also as a gazelle. With almost 3 years of life (it was launched in October 2017) it has already attracted the interest of investors such as George Soros and Goldman Sachs , among others. In 2019, it received investments from the Chinese Tencent and Softbank for US $ 150 million , which were valued at US $ 900 million. Today they have 400 employees, "of whom 150 were hired during the pandemic," describes Pierpaolo Barbieri, its CEO and founder.

A 33-year-old native of the Caballito neighborhood, he created the startup focused on financial business . It offers prepaid cards, loans, installment credits and service payments, among other things, unified in a mobile application. Although it may seem otherwise, Barbieri maintains that it does not compete with traditional banks: “We have alliances with BIND, Galicia and Mastercard. We are complementary ”, he defines.

In such a short history, Ualá records “between 2 and 3 million” of open accounts, which are served from its parent company, in Palermo, and its subsidiaries in Rosario and Córdoba. Barbieri studied history, he is the author of a book on the economy in the Spanish civil war "that nobody read." But his vision as an entrepreneur is another. " Going public is not a motivation . I do not rule it out, but it would be a consequence and not an objective, ”he said.

Statistically, most startups fail before their 3rd birthday . A small percentage, between 3 and 4%, manages to climb at rates well above the average. Some even manage to reach unsuspected heights, as in the case of Satellogic, a company that designs and manufactures microsatellites, puts them into orbit and offers high-resolution imaging services from space, very useful for agricultural producers, oil companies and governments. The project is to create a constellation of 300 satellites to survey the entire surface of the Earth in real time .

Founded in 2010 by a mathematician, Emiliano Kargieman, and a computer expert, Gerardo Richarte, Satellogic has already obtained several credentials: from nowhere it has managed to launch 10 satellites so far. He named the first one "Capitán Beto", in homage to the theme of Invisible, the band led by Luis Alberto Spinetta. After receiving an injection of US $ 50 million last year , they plan to add another 11 in the next two months , for which they negotiate with several suppliers, including Space X, one of the companies of billionaire Elon Musk. "The satellite industry is very small," Kargieman says, "and there are few satellite launch companies."

45, Kargieman has a background as an entrepreneur: He co-founded Core Security Securities, a startup focused on computer security, sold a few years later. Part of that money allowed him to enter a NASA program, from which he projected Satellogic. " New space is an industry that grows thanks to the private sector," argues the businessman. Asian father, his 3-year-old daughter Kargieman argues that to create a unicorn there is no formula: "He has some luck and a lot of effort, " he says.

Etermax, a developer of mobile video games, breaks all stereotypes . It was born profitable, it still is, and Máximo Cavazzani, a software engineer from ITBA, maintains that the secret of his business is monetization through advertising . With its headquarters in Villa Urquiza, Etermax is the creator of Apalabrados y Questioned, with high impact. Without going any further, in 2015, Asked was the most downloaded game from the App Store, the Apple store. " It's like winning the Oscar, " says Cavazzani.

The data is not surprising. Asked was translated into 34 languages ​​and is distributed in 180 countries. Cavazzani maintains that the valuation of the company does not concern him. From 2009 to date, it recruited 400 employees, offices in Buenos Aires, Mendoza, Montevideo, Berlin, San Pablo and Mexico City. And the businessman remarks that Etermax is "a solid company, with more than 10 years of sustained profitability and never received external investments ". Some estimate that its valuation exceeds $ 500 million. "Without going into technical questions, Etermax is clearly a unicorn," says Diego González Bravo, investor and vice president of ARCAP.

Agrofy is last in the pack, but she comes with the same momentum as the rest. It is an electronic commerce platform (a mix between Mercado Libre and OLX) with a focus on agribusiness. "It is a content portal and more than 20 categories of products and services for producers," explains Alejandro Losada from Rosario, co-founder of the startup.

Agrofy has 280 employees and is operational in 7 countries in the region, including the United States, Brazil, Colombia, Chile and Uruguay. "It has more than 4 million monthly visits, which access 20 product categories: machinery, fertilizers, credits, insurance and freight services, for example," the businessman listed.

How the value of a company is calculated

In the movie "Social Network", Sean Parker convinces Mark Zuckerberg that Facebook can be a unicorn.

In their first meeting, Napster creator Sean Parker tried to convince Mark Zuckerberg that Facebook had enormous potential. He told her that the social network could climb to the top if it managed to attract the interest of investment funds. And overcome the magic barrier: a valuation of $ 1 billion. Inspired by real events, the dialogue appears in the movie "Social Network" , in which Parker (Justin Timberlake) and Zuckerberg (Jesse Eisenberg) talk about the highest aspiration of every startup: to achieve the category of unicorn.

In Argentina, the unicorn club is made up of Mercado Libre, Globant, Despegar, OLX and Auth0. But the group could expand in the short term. Above all, due to the emergence of investment funds, which are betting on very young but promising startups. " That is not surprising, we hope that many more unicorns will appear in the country, " says Luis Bermejo, director of the Alaya Capital fund.

"All funds look for their unicorn, because only 5% of startups achieve rapid growth," explains Diego González Bravo, vice president of ARCAP, the entity that today groups the 50 investment funds that operate in Argentina. It is the most visible face of the so-called venture capital , whose objective is to invest in the beginnings of a company in the hope of capturing the next unicorn. It is a statistical calculation that has worked for decades in the Silicon Valley. Of every 10 companies, only one or two manage to take off, whose profitability makes it possible to recover all the investments and leave strong profits.

The director of Wayra Corporate Ventures (Telefónica), Agustín Rotondo, describes the different stages of financing a startup and how its valuation is calculated . “In the beginning, they used their own funds, from relatives or acquaintances. The next stage is the entry of “angel investors. They are people who invest looking for a future financial return ”, lists the executive.

Subsequently, depending on how the project evolves, the investment rounds arrive, in which the startup explains its business plan, its financial needs and delivers a portion of the company in exchange. "In the last stages, investments are usually formalized no longer as a debt, but as a capitalization in company shares with a shareholders agreement behind," adds Rotondo.

About the valuation of a startup there are different formulas. Most make losses for years because growing requires constant reinvestments. The most usual way is to estimate the income and project it into the future, but Rotondo clarifies that "these methods are only indicative, since the valuations end up being defined by a negotiation between the investor and the startup." For the case of Ualá, which in 2019 received US $ 150 million, agreed with Tencent and Softbank a valuation of US $ 900 million .

These evaluations are difficult in the case of Etermax. The thriving developer of mobile games was born profitable and never needed financing to expand. However, González Bravo maintains that "beyond technical questions, Etermax is clearly a unicorn."

Emiliano Kargiemann, from Satellogic, believes that his company is still far from classifying within the category. " It is not something that reveals me ," said the businessman to the Economic. However, Satellogic received an investment of US $ 50 million last year to finance its project to create an ecosystem of 300 low-cost microsatellites.