The UK has recently overtaken San Francisco in terms of tech start-ups. According to a new study conducted by GP Bullhound, London is home to more unicorn technology companies than any other European city. As of this year the city is home to 13 Unicorns and figures released in 2018 showed that the wider UK has created 60 unicorn tech startups overall since 1990.
It’s easy to find a list of recent and rumoured IPO’s and companies that are making all the right noises, but for the entrepreneurial investor, these ships have already sailed by the time you hear about them.
The people that make real money out of investing in start-ups are the ones that find the hidden unicorns that no one else knows about.
What is a Unicorn start-up?
Everyone has heard of unicorns like Uber, Airbnb, Didi and Pinterest, but rarely pause to think about what a unicorn company actually is. The term unicorn was coined in the year 2013 by the founder of the Cowboy Ventures, Aileen Lee for start-ups with a valuation of more than $1 billion (£736 million). The term was used to put an emphasis on the rarity of such start-ups.
The term Unicorn start up is now used to refer to any company that was founded after the year 2003 and has a market valuation in excess of $1 billion.
Top 5 unicorns in the world today
- Uber, valued at $68 billion
- Didi Chuxing, valued at $56 billion
- Xiomi, valued at $46 billion
- Meituan Dianping, valued at $30 billion
- Airbnb, valued at $29.3 billion
The UK's Top Unicorns
- BenevolentAI, valued at $2 billion
- Transferwise, valued at $4 billion
- Improbable, valued at $2 billion
- Graphcore, valued at $1.7 billion
- Darktrace, valued at $1.65 billion
What makes a Unicorn different from other start-ups?
Reports show that a $20,000 investment in the angel round for the taxi-disrupting car hailing service would now be in excess of $50 million dollars.
Y-Combinator invested $20,000 for 6% of the company in Airbnb. The company now is worth $31 billion and Y-Combinator’s stake now is estimated to be worth about $890 million, more than a 44,000x return on their $20,000!
Don’t you wish for a time travel so that you could go back in time and invest in companies like Uber, Google, Facebook and Airbnb when they first got started?
A large number of high net worth individuals initially turned down the chance to invest in these high net-worth unicorns that disrupted the industry they belong to.
Also, it is worth mentioning that 87% of the unicorn products are software, 7% are hardware, and the rest 6 percent are other products and services. Nearly all the top unicorns you see leveraged paradigm shifts in technology to write incredible success stories. Uber changed the way people book cabs by allowing you to book a taxi with a few taps on your phone, Airbnb made sharing your house possible over the internet while Dropbox profited immensely from cloud computing technology.
Important questions to ask before investing in a start up
It’s incredibly easy to get swept up in the founder's unwavering passion and belief in their start up. Their unwavering passion and commitment to the cause often disrupts your ability to separate the wheat from the chaff. Before you decide to invest your hard-earned money, it is imperative that you take into account all the facts, figures and skills that can help the entrepreneur turn their dream into reality. Not all start-ups end up being Google and Uber and that is why it is strongly recommended that would-be investors should consider certain factors. These factors include:
- What can you learn about the founders track record and ability to execute?
- What about the management team's skill and passion?
- What funding has been raised so far and what is the current valuation?
- What is the companies core technology and innovation? Is it scalable?
- What are their goals, where do they plan to be in 3, 5, 10 years?
- What are their future cash requirements?
- What is the potential market? Will it disrupt an existing sector?
- What is the companies scale and reach? Is it global?
- How fast are they growing?
According to GP Bullhound there are 15 startups with the potential to become London unicorns over the next two years...
Can you find them yourself?
"I'd rather be a mule my customer loves than a unicorn my investor loves." - Ash Ashutosh
Actifio's Ash Ashutosh embodies the spirit of many founders, they are not doing what they do to become unicorns, or create ways for people to make money. They care about their product and their customers and raise investment under the radar through trusted channels. This makes it hard for even the savviest investors to sniff them out.
At TrendScout, that's what we do, finding the answers to the important questions, listening to the whispers and helping connect investors to fast growth start-ups.