Building a unicorn (billion-dollar) startup

SINGAPORE - Billion-dollar start-ups were once the stuff of legend, which is how private companies worth more than US$1 billion (S$1.42 billion) came to be known as "unicorns".

But with such businesses becoming more common these days, global business-software solutions provider Sage undertook a study into the likely ingredients that go into making such billion-dollar entities.

The study says founders of unicorn companies come mostly from the US's Ivy League universities, are almost overwhelmingly male, and tend to start up their companies with a partner.

The alma mater that comes out tops is Stanford University, which boasts the most number of unicorn founders as alumni (51); it pips Harvard with 37, and the University of California with 18.

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US institutions accounted for nine of the top 15 most popular universities among unicorn founders.

More than nine in 10 (94 per cent) unicorn founders are male.

Around two thirds of unicorns were created by co-founders, and the remaining third, by single founders.

For 60 per cent of the founders, their current unicorn is the first and only company they have built.

Fitting this description are well-known unicorns such as worldwide online transportation network company Uber, social networking site Facebook and online marketplace and home-stay network Airbnb.

All three were founded by American males: Uber by American Travis Kalanick (who studied at the University of California, Los Angeles) and Canadian Garrett Camp; Facebook by American Mark Zuckerberg and Eduardo Saverin, who was then a US citizen (and both were from Harvard); and Airbnb was started by Americans Brian Chesky and Joe Gebbia (both of whom attended the Rhode Island School of Design).

The US has the largest number of unicorns - 144 out of a total of 242 companies - followed by China with 47, and India with 10.

But China is fast catching up with the US; it has more companies reaching unicorn status, while those in the US are losing theirs.

Uber is the largest unicorn in the world. The second-largest hails from China - financial technology company ANT Financial, which is valued at US$60 billion.

Chinese companies Xiaomi (electronics company and smartphone maker), Alibaba (e-commerce company) and Didi Chuxing (ride-sharing company) take the fourth, fifth and sixth spots on a rollcall of the world's largest unicorns.

In Europe, the United Kingdom leads the pack with nine unicorns, followed by Germany with six.

London is the city with the highest number of unicorns in Europe, followed by Berlin and Stockholm.

Some of the most well-known unicorns in this region are Swedish music, podcast and video-streaming service Spotify, valued at some US$8.5 billion, and e-commerce site, Farfetch, which is headquartered in the UK with a valuation of US$1.5 billion.

About 150 unicorns are valued at between US$1 billion and US$2 billion; 16 are valued at more than US$10 billion.

The consumer-Internet sector seems to be the easiest place in which to grow a unicorn; 49 out of the world's 242 unicorns are in this sector.

The software industry is close behind, with 48 unicorns, followed by e-commerce with 37, financial services with 22, and healthcare with 18.

The sectors with the least number of unicorns are manufacturing, travel, and space and defence, with one unicorn each.

The value of the unicorns in the consumer-Internet sector, however, far exceed that of the other sectors; consumer-Internet unicorns have a combined value of close to US$319 billion, followed by financial-services unicorns, which have a combined value of just over US$132 billion, and e-commerce unicorns with a combined value of close to US$125 billion.

Most of the unicorns in existence today were founded in 2007; 29 companies were founded that year, including e-commerce company Flipkart, file-hosting service provider Dropbox and subscription video-on-demand service provider Hulu.

Some became achieved unicorn status very quickly: Hulu, software company Pivotal, and ride-hailing company UCar were less than a year old when they reached the US$1-billion mark.

For 35 unicorns, it took four years before to reach unicorn status.

Education-software company Renaissance Learning took the longest time - it was 30 years old when it became a unicorn.

michquah@sph.com.sg

This article was first published on Jan 26, 2017.
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