Legea-Cs.MyForum.ro

winewooisn · Junior Data inscrierii: 26/Apr/2014 Mesaje: 6

It’s been over a year since we wrote our original post sharing our analysis of the last decade’s most successful U.S.-based, venture-backed tech companies.

As we wrote in our original post – many entrepreneurs, and the venture investors who back them, seek to build big, impactful companies valued at a billion dollars or more. We called these companies “unicorns” because what they had achieved seemed very difficult, rare, and relatively unstudied.

That billion-dollar threshold is important, because historically, top venture funds have driven returns from their ownership in just a few companies that grow to be super-successful. And as most traditional funds have grown in size, they require larger “exits” to deliver acceptable returns (Cowboy Ventures is different – we’re small by design, although we’d be happy to invest in Unicorns).
Aileen Lee
Crunch Network Contributor

Aileen Lee is founder of Cowboy Ventures, a seed-stage fund that backs entrepreneurs reinventing work and personal life through software.
More posts by this contributor:

Welcome To The Unicorn Club: Learning From Billion-Dollar Startups

How to join the network

For example, to return just the initial capital of a $400 million venture fund, that might mean needing to own 20 percent of two different $1 billion companies at exit, or 20 percent of a $2 billion company when the company is acquired or goes public.

The post and term generated more attention than expected. It’s been a nice surprise – it’s a singular word for a deosebit thing, and we love it’s not traditional business lingo.

From some, there’s even concern now that pursuit of ‘unicornhood’ is both annoying and may have somehow changed the nature of tech valuations. To that, we’d emphasize two points:

First, our project uses valuation as a filter (an admittedly imperfect one) to identify and learn from the fastest-scaling tech companies of our time. Our goal is learning, not list making. Nor is it to encourage companies to optimize point-in-time paper valuations, which have a lot of downside if they are not sustainable.

Second, as noted, today’s traditional venture firms are sized to need unicorn exits to deliver returns. Some investors may grumble about entrepreneurs wanting ‘unicorn valuations.’ But let’s be honest, most investors want them, too, and are supporting the massive capitalization of these companies. (More on that later.)

So with the big caveats that our data is based on publicly available sources, as well as on a snapshot in time (which has definite limitations), here is a summary of new learning and reinforced lessons from an updated set of companies1:
Summary Of Our Updated Analysis

1) We found 84 U.S.-based companies belong to what we call the “unicorn club,” a jaw-dropping 115% increase from our last post. The increase is driven largely by “paper unicorns” – private companies that have not yet had a “liquidity event.” But, these companies are still a super-rarity: our list is just .14% of venture-backed consumer and enterprise tech startups.

2) On average, eight unicorns were born per year in the past decade (versus four in the 2003-2013 era). There’s not yet a super-unicorn ($100 billion-plus in value) born from the 2005-2015 decade, but there are now nine “decacorns” ($10 billion-plus in value), 3x our last post.

3) Consumer-oriented companies drive the majority of value in our set: more companies and higher average value per company. They raise a lot of private capital.

4) Enterprise-oriented companies are fewer and raise less private capital; and increased enterprise fundraising has reduced their return on private dollars raised.

5) In terms of business models, e-commerce companies drive the majority of value in our set, but have the lowest “capital efficiency.” Enterprise and audience companies have decreased in market share of our set, while SaaS companies have grown in market share significantly. We’ve also added a new category: Internet of Things/consumer electronics.

6) It’s a long journey, beyond vesting periods: it has taken ~7 years on average before a “liquidity event” for the 39% who have ‘exited’ – not including the 61% of our list that is still private. The capital efficiency of these “private unicorns” is surprisingly low, which will likely impact future returns for founders, investors and employees.

7) Take heart, “old people” of Silicon Valley: Companies with educated, tech-savvy, experienced 30-something, co-founding teams with history together have built the most successes. Twenty-something founders and successful pivots are the minority; dedicated CEOs who are able to scale their companies for the long haul are not.

8) San Francisco maintains dominance as the new epicenter of the Bay Area’s most valuable tech companies; cities like NYC and L.A. are growing in importance

9) Immigrants play a huge role in the founding and value creation of today’s tech companies. We wonder how much more value could be created if it were easier to get a work visa.

10) There’s still too little diversity at the top. There is movement in a positive direction on gender from a zero base; and not enough data on race and other underrepresented groups.
Some Deeper Explanation And Additional Findings

1) Welcome to the exclusive, 84-member Unicorn Club: the top .14%

We identified 84 companies for our set (by our definition, U.S.-based, VC-backed software and Internet-oriented companies founded since 2005 and valued at over $1 billion by public or private market investors1). That’s a staggering 115% increase since our last analysis just a year-and-a-half ago.
The total value of these companies is $327 Billion – 2.4x our last analysis (excluding Facebook, which was almost half the value of our last list).
It’s the number of companies, not their individual valuations, driving the dramatic increase in integral value. The average company value on our list is worth $3.9 billion, just an ~8% increase from last time.
And it’s the number of “paper unicorns” that has dramatically increased the absolut value. Private companies are now 61% (vs 36%) of our list, worth $188 billion in total and $3.7 billion on average.
Why so many more ‘unicorn’ companies now versus 2013? Some thoughts:

a) Compelling products that are easier than ever to adopt through large and growing global markets, smartphones, and social networks to spread the word faster. This is driving more exciting growth, adoption and engagement numbers than ever before (A16Z’s strong presentation on the underlying fundamentals here.

b) A perception of winner-take-all markets due to branding, scale and/or network effects, and intimidating, growing cash war chests (see here) driving investor FOMO, and demand to invest in ‘winners’ at almost any price (Bill Gurley has great insights about that here).

c) Competitive later stage capital from more sources than ever – late stage funds, public investors investing earlier, and global strategics. These investors often have a low cost of capital which gives them a lower return hurdle than traditional venture investors; and they often receive downside protection as part of their investment that isn’t reflected in valuations (Fenwick’s great analysis of this trend here).

d) Vibrant public markets fueling optimism: the NASDAQ is up 32% since our last analysis.

e) Optimistic private markets sheltering a thicket of “paper unicorns.” When companies are private, founders can share more about their future dreams with investors; report less; and the shares are illiquid, constraining short-term changes in valuation. Those factors, combined with the above reasons, have driven significant ‘multiple inflation’ for private versus public company valuations (giving private companies more value than public ones as a multiple of # of engaged users, revenues, EBIT, growth rate), including from the WSJ;
The Verge; Josh Kopelman; Thomas Tunguz; CB Insights; and Deepak Ravchanran.

Despite the doubling, building one of these companies is still ridiculously difficult and rare. If 60,000 software and Internet companies were funded in the past decade2, that means only .14% have become unicorns– or one in every 714. The odds of building, working for or backing one are worse than catching a ball at a major league game; but, better than the chance of dying by shark attack – so we’ve got that going for us, which is nice.

2) On average, eight unicorns were born per year (versus four in the 2003-2013 era) in the past decade. There’s not yet a super-unicorn ($100Bn+ in value) born from 2005-2015, but there are now nine “decacorns” ($10 billion-plus in value), 3x our last post.

The best years to start a unicorn were 2007 (27% of companies in our set) and 2009 (18%). During these 2 years, 45% of the companies in our set were started.
What happened in 2007 and 2009? 2007: The launch of the iPhone. By the end of the year, the beginning of the worst US economic crisis since the great depression; 2009: Just months previously, Android was launched; and the bottom of the “great recession” occurred – the lowest point of the NASDAQ, S&P500 and DJIA in the last decade
The best times to start a unicorn company could be a) post the launch of a watershed new tech platform; and b) during a prolonged public market downturn. Without many great jobs available, the reduced opportunity cost and related hardship may spawn great innovation and grit.
To note, there are some astoundingly young companies in our set including Illumio, Oscar Health and Zenefits, all <3 years young. The combo of great products plus growing global, mobile markets may have accelerated time-to-‘escape velocity’ adoption and correspondingly, time-to-unicorn for some companies. This fără întârziere ramp could also mean a repede decline for other companies if customers are not extra engaged and happy for the long haul.
As we wrote previously, every major technology wave has given birth to one or more “super-unicorns” – companies that grow to be worth >$100B over time.
Facebook, the super-unicorn of the 2000s, has dramatically increased in value – it is now worth $247Bn, up 102% since we last wrote. Now they are worth more than the sum of all other companies on last year’s list, and all the consumer companies on our current list. (PS: FB has also ‘aged out’ of our analysis, as it’s now 11 years old).
There are now 9 “decacorns” (in our lingo, companies worth >$10bn), a 3x increase vs. our last analysis. To note, 5 of the 9 are largely mobile (Uber, Twitter, WhatsApp, SnapChat, Pinterest).
History suggests the 2010s will give rise to a super-unicorn or two that reflect the key tech wave of the decade, the mobile web. Whichever company (or companies) comes to represent this key innovation (Uber?) will likely continue to accelerate in value as FB, Google and Amzn have over the past decade.

3) Consumer-oriented unicorns continue to drive the majority of value in our set: more companies, and higher average value per company. They also raise a lot of private capital.

Consumer-oriented companies (companies where the primary customer is a consumer) contribute 72% of the aggregate value on our list (vs 60% last time), and comprise 55% of the companies on our list. They are worth $5.1Bn on average.
8 of the top 10 most valuable companies are consumer–oriented; consumer companies seem to reach higher peaks than enterprise companies.
They are currently worth about 11x the private capital raised on average (excluding >100x outliers WhatsApp, FitBit and YouTube; also 11x on average in our last analysis. 9x is the current median)
When founders start a company aiming to be mega successful, they may not realize how many rounds of dilution may be ahead; or how many dollars of liquidation preference might be added (Heidi Roizen wrote an excellent post on this here).
Cases in point – the consumer companies on our list have raised on average $535 million in six private rounds (that’s series E or beyond) versus $348 million in our last analysis, a whopping 54% increase. Seven consumer companies on our list have raised over $1 billion in private capital each.
Some amazing exits have been driven from consumer-oriented companies relative to private capital raised (and more than half through acquisition): WhatsApp (325x!), YouTube (144x), Fitbit (132x), Zillow (48x), and Nest (40x)
Conversely, 20% of our consumer-oriented companies are valued at <4x the private capital raised: Evernote, FanDuel, Gilt Groupe, Groupon, JustFab, Lyft, SoFi, Tango, and Zynga

4) Enterprise-oriented companies raise much less private capital; but increased fundraising has seriously reduced their capital efficiency.

The average enterprise-oriented company (where the primary customer is a business) is worth $2.5 billion, less than half the average consumer company.
To note, their private capital raised is $247 million on average, up 79% versus our last analysis. This increase has reduced their average capital efficiency significantly; from 26x in our last analysis, to 7.6x for the median enterprise company in our set.
Some outstanding enterprise-oriented exits relative to private capital raised: Veeva, Workday, and Softlayer (926x!, 87x, 67x respectively)
Conversely, 18% of our enterprise-oriented companies’ recent valuation is <4x their private capital raised: AppNexus, Automattic, Box, Cloudera, Lookout, MagicLeap and Simplivity.

5) E-commerce drives the most value of five primary business models, and SaaS companies have significantly increased their market share since our last analysis. We’ve also added a fifth business model category: Consumer Electronics/Internet of Things.