Everyone loves a unicorn – a mythical beast, just like billion dollar tech (pre-IPO) start-ups were supposed to be (neither Google nor Amazon were worth $1bn as private companies) except nowadays they seem to be everywhere. In fact, at the start of this year there were 80 unicorns and counting (according to Fortune) and so the industry has come up with something even rarer – a decacorn, a start-up heading for a $10bn valuation. Well-known decacorns include Uber, Snapchat, Dropbox and AirBnB.
Whilst many will debate whether or not these companies can really be worth the illustrious valuations given, what is obvious is that investors see massive potential in these disrupters which – whilst relatively young – can have a massive impact on global markets. The recent China « Black Monday » was a testament to this, with many of the TMT super-weights bringing the stock indices back from the brink. In fact, if you look at the trading casualties over that turbulent period, many companies that would have been considered safe hands (large industrial conglomerates paying high dividends) suffered the biggest drops.
So, what does this tell us? Well, Fortune also reported that the unicorn culture is driving private company valuations across the board. According to the law firm Cooley LLP, the median valuation of a Series A round of funding soared 135% between 2012 and 2014 with this effect also filtering down into subsequent rounds. Some will cry bubble, whilst others will say it’s different this time around. The reality probably sits somewhere in the middle of the two camps but for the time being, the unicorn glow makes the TMT market a very nice place to operate!