In Search of the Unicorn
These days the Venture Capital industry speaks of unicorns, companies that reach and/or supersede a value of 1 billion dollars in a relatively small amount of time (less than 10 years). Unicorns are symbols of power and mystery, and Inversion Funds are on the hunt for them.
The rapid and exponential progress of technology and communications has generated the anomaly that the last decade has seen the greatest proliferation of unicorns than ever before. The figure below shows 31 of the most important unicorns out of the 56 that have developed within the last decade* in the United States:
* Considering the “last decade” from 2000 and having a more empirical significance rather than scientific. Source: Internal Research Based on WSJ & TechCrunch.
A category of Super Unicorns exist, or companies that are valued at more than 100 billion dollars. Currently, the most iconic case is Facebook, whose value exceeds U$S 200B. Past decades have also given birth to super unicorns. Google, Amazon and Yahoo, among others, were founded in the 1990’s. Cisco in the 80s; and Apple, Microsoft and Intel in the 60s and 70s. The figure to the right shows the current value of these super unicorns. (Source: Yahoo Finance Dec-14).
Each wave of technological innovation leaves room for the development of one or more super unicorn. The 60s was the era of semiconductors; the 70s, the birth of the personal computer; the 80s, the development of software; the 90s marked the beginning of the era of the internet; and in the 2000 decade, social networks.
I want to point out 5 principal characteristics of unicorns that Aileen Lee discusses in his article, “Welcome to the Unicorn Club”:
- Companies are classified as one of four main business models: e-commerce, software-as-a-service, enterprise, or audience.
- Consumer-oriented models require greater capital investment in the end, and as a consequence, have lower profitability than business-oriented models.
- The average amount of time for the evolution of a unicorn is 7 years.
- Unicorns with co-founders of thirty or so years that have experience together and a good education have experienced the most success.
- San Francisco is where founders of North American unicorns prefer to be.
Global integration through communications, technology and infrastructure are generating exponential global change that we have never seen before. This movement creates an enormous amount of opportunities in other regions, especially in emerging regions. This presents the opportunity for unicorns to emerge from regions outside of the United States. The evidence below proves that there are already identified cases of unicorns in other regions:
UNICORNS IN OTHER REGIONS
Source: Yahoo Finance, WSJ, & Internal Research.
There are 3 factors embedded within Latin America that I consider relevant in foreseeing that this region has a very good chance of generating more unicorns:
☑ The cultural factor. Latin entrepreneurs have several competitive advantages generated by the essence of Latin culture:
o The Latin culture is social. Being the decade of social networks, this is a key tool in validating and proposing business models. According to a study by Comscore, Latinos are connected to social networks twice as much as the global average.
o The boom of the Hispanic-American community and the bridges of integration. The Hispanic community in the United States has grown tremendously, awaking more interest year after year in creating bridges between Latin America and the United States. Furthermore, the entrepreneurial community in Latin America is addicted to the Silicon Valley (SV) culture, which promotes the adoption of the best SV practices and strengthens interest in these bridges.
o The latin experience of confronting adverse, economical challenges. In the last few decades, Latin American countries have endured quite an unfavorable spectrum for economic development and entrepreneurship. This story of adversity has generated a strong culture that is capable of facing moments of stress that all startups usually face when going through the rite of passage known as the “valley of death.”
☑ Development of the Regional Ecosystem. Increasingly, there are more private organizations that participate in the construction of a rich ecosystem full of enterprises generating high innovative and technological impact. NXTP Labs is an example of such organization. While it is a long term process, I believe that the foundation of a promising, regional economy is set. I strongly advise start-up founders and investors to be aware and to have a global outlook, in order to create new business models. This awareness is generating integration and interaction between entities and members of the entrepreneurial community within different Latin American countries that has never happened before.
Active Participation of the State. The productive agenda linked to entrepreneurs has gained significant attention in government agendas of the region; who have realized that the only manner in which to generate innovation is to outline polices that facilitate and financially support the development of start-ups having an innovational impact. For example:
CHILE. Production Development Corporates (Corfo) is a Chilean government agency that helps entrepreneurship, innovation and competitiveness within the country with the objective of promoting better opportunities, and more of them, for everyone. Actually, Corfo runs more than 50 programs that are aided by more than 200 thousand beneficiaries each year.
COLOMBIA. Apps.co: an initiative designed by the Ministry of Information Technology and Communications (MinTIC), together with their plan Vive Digital, to promote and potentially create business through the use of TIC, placing special interest in mobile app development, software and content.
iNNpulsa: National Government Institution created in February 2012 to support and promote extraordinary business growth, that is to say, business initiatives that are able to maintain rapid growth in a cost-effective way. In this sense, working to promote high-impact innovation and entrepreneurship while understanding the factors that allow for this kind of growth.
RutaN: The mission of the Center of Innovation and Business of Medellin to promote new business rooted in a global vision. Startups should be based in the Antioquia region.
BRAZIL. BNDES , Startup Brazil, Finep.
BNDES is the Brazilian Development Bank and the principal agent for development in Brazil. BNDES has played a key role in promoting expansion of the industry and infrastructure in the country.
FINEP has a similar objective to help the full cycle of technological development. This program helps businesses implement highly innovative R + D programs as well as prioritizes the promotion of sectors such as: information technology and communication, aerospace, renewable energies, clean technologies, health, biotechnology, nanotechnology and aviation.
Start-Up Brasil is a Federal Government initiative created by the Ministry of Science, Technology and Innovation in association with private accelerators to help technologically-based companies.
MEXICO: INADEM Y NAFIN.
INADEM. The National Institute of the Entrepreneur is an administrative body within the Ministry of Economy that aims to implement, execute and coordinate national policy for micro, small and medium-sized enterprises, promoting innovation, competitiveness and projections for the national and international market in order to increase their contribution to economic development and social well-being as well as contribute to the development of policies that promote the entrepreneurial culture and business productivity. INADEM is in the process of implementing a financial program for high-impact funds.
NAFIN. The program NAFIN – Nacional Financiera- encourages funding for companies of high impact in economic development, given a guarantee of recuperation of capital.
The Government of the City of Buenos Aires is very active in supporting entrepreneurs in the city, we must not forget that it is the city with the strongest entrepreneurial ecosystem in the region. It is not a coincidence that the largest enterprises of Latin America that are leading their market have come from Buenos Aires. The Government of the City of Buenos Aires has launched a program to fund accelerators within the digital economy and biotechnology sectors, biotechnology, social character (innovation having a social impact), hardware, audiovisual industries, design and agribusiness, among others.
At NXTP Labs we are working hard to generate the next unicorn by leveraging the competitive advantages of the Latin American market.
If you have seen our next potential unicorn, let me know.