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Home / Business / Are there too many startup companies with unicorns? : NPR

Are there too many startup companies with unicorns? : NPR



A customer is testing an eyebrow pencil in the mirror of the New York flagship store for beauty startup Glossier. It is one of the newest companies to become a unicorn, with a market value of $ 1

billion as of March.

Amy Scott / NPR


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Amy Scott / NPR

A customer is testing an eyebrow pencil in the mirror of the flagship store in New York for beauty startup Glossier. It is one of the newest companies to become a unicorn, with a market value of $ 1 billion from March.

Amy Scott / NPR

In a newly started world, unicorns are companies that are said to have a rare type of entrepreneurial magic. They are privately owned companies for a billion dollars or more. Uber and Spotify were unicorns. DoorDash and Airbnb are still described in that way.

But as investment in Silicon Valley has increased over the past few years, it is far more than $ 1 billion plus startups than ever. So the question arises: Has the term unicorn lost its special meaning?

Aileen Lee was the first to call hot startups unicorns. In 2013, she struggled to find an easy way to describe companies younger than 10 years old, but worth more than $ 1 billion. There were only 39 of them. She decided to describe them as the Unicorn Club. Since then, the club has grown to 484 members, according to TechCrunch.

Lee said in an email to NPR that she wanted a name that would "capture the mood that was much shorter and easier to read."

"I replaced & # 39; megahit & # 39 ;, & # 39; homerun & # 39; and & # 39; unicorn & # 39; in the piece, and the unicorn captured exactly the feeling I seemed to convey so well, "wrote Lee, who runs venture capital firm Cowboy Ventures. "That it's a very rare, slightly magical occurrence and something special."

She published her findings on the success rates of these startups in a TechCrunch report.

And the unicorn took off.

The term became synonymous with startup success among financial analysts and investors as well as trading and business media.

Some of the early members of this club are Groupon, Twitter, Pinterest and Zulily. Now unicorns from Airbnb, Rent Runway and Juul range to software and web services companies such as Infor and Stripe.

As these companies grow older, most become public or are acquired by other companies. After that, the unicorns cast the magic title. This year, former unicorns Uber, Lyft, Pinterest and Slack all gave up their horns to start selling stocks in the stock market.

But with several unicorns popping up each year, is the $ 1 billion mark still special?

Lee said she still believes in unicorn magic.

"There are thousands of startups born each year, and despite the best intentions of the founders and team members, only a tiny fraction grows to be worth over a billion dollars over time," she wrote.

The number of unicorns has increased in part due to an influx of both startups and investors. After the recession caused a sharp decline in startups and other new businesses, a number of all kinds of new businesses entered the market, according to a report by the Kauffman Foundation, and many of them were start-ups.

Carl Doty, Vice President of Emerging Technology Research at Forrester Research, says that a very large number of startups were founded when the economy recovered. Thus a spike in the number of unicorns. Many of them currently have a market value of $ 1 billion.

"The total number of startups exploded, so we're going to see more and more unicorns, as time goes on. And frankly, more investors too," Doty says.

A customer uses lip balm in the beauty startup Glosses flagship store.

Amy Scott / NPR


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A customer uses lip balm in the beauty startup Glosses flagship store.

Amy Scott / NPR

The success stories of so many startups have led to more investments from venture capital firms. Sunil Rajaraman with Foundation Capital says investors want to make sure they are part of the next big thing, especially as unicorns like Slack and Lyft throw their status by going public.

"With the big exits, I think the fear is only going to get bigger that we will not miss the next three or four of these," says Rajaraman.

Plus it will be easier for startup to increase and grow faster. It's thanks to former unicorns, such as Facebook, Google and Amazon, which have established affordable cloud services and web platforms that allow younger unicorns to run their businesses, Lee wrote.

Former Unicorn Lyft uses Google Maps to steer drivers straight. Pinterest relies on Google image search to reach new users. And most tech startups can't reach mobile phone users without Google or Apple giving them access to app stores.

Other Unicorns

Companies that reach the magic threshold often offer a niche service or product that appeals to a specific group of people.

Lee found in his report that most of the successful unicorns were consumer-oriented, followed by companies providing services for other companies.

Customers are waiting to enter the Glosses flagship store in New York on July 14.

Amy Scott / NPR


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Amy Scott / NPR

Customers are waiting to enter the Glosses flagship store in New York on July 14.

Amy Scott / NPR

The online beauty product store Glossier is one of the latest unicorns, with a market value of $ 1.2 billion. The company developed makeup and skin care products based on customer feedback.

On a recent Sunday afternoon in New York City, hundreds of people stood outside the Glosses flagship store waiting to experience the well-lit mirrors and tables full of beauty products. Customers are encouraged to take selfies that are capable of Instagram while trying to make up.

Another new unicorn is Impossible Foods, a company that benefits from the new health and environmentally conscious wave of the millennia by selling plant-based foods that mimic meat. The company valued at $ 2 billion in May and recently began selling Impossible Whopper at some Burger Kings in the United States.

In the late 1990s, investors threw their money on many unprofitable online startups, creating the dot-com bubble. Some analysts have compared the attack of unicorns to the technology boom that saw the bubble burst.

Some of the unicorns may actually be overestimated, according to a 2017 report from the National Bureau of Economic Research.

Keith Wright, an instructor at Villanova University School of Business in Pennsylvania, warned in a 2018 CNBC article that these unicorn startups are likely to face the same fate as dot-com companies.

"In case you missed it, the peak of the technical unicorn bubble is already reached," Wright wrote. "And it's going to be all downhill from here."

But Rajaraman says he does not believe that these start-ups will suffer a similar fate because many take longer to mature and see profits before they expire.

"The difference I see between boom-dot-com and now is that these companies are actually generating really good revenue and growing," he says. "Venture capitalists are realizing returns."


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