Private businesses with a $1billion valuation used to be a rarity – “unicorns” in the world of corporate finance. But an explosion of global capital has made pricey companies with potential increasingly commonplace.
There were three and a half as many new unicorns in 2021 (518) as there were in 2020 (134) according to CB Insights. While the U.S. still leads, an increasing number of private companies valued at billion dollars or more are located in China, other parts of Asia and Europe.
What used to be virtually all purple in the chart above, is becoming increasingly green, red and yellow.
“The most common focus for companies on the original unicorn list was consumer internet services,” reports Bloomberg Businessweek. “Nine years later, there are more companies in financial technology than in any other category, led by the payment-services company Stripe.”
The U.S. continues to be the leading location for $1 billion+ startups, but there are more Chinese unicorns in categories such as education, hardware, and transportation.
The Role of IP Rights?
A good question for readers of IP CloseUp to ask is what does the intellectual property makeup of unicorns look like? Are today’s companies valued north of a billion dollars more or less dependent on patents, trademarks, copyrights and trade secrets?
Many can afford to apply for and receive patents or to buy them outright from companies like IBM, but, increasingly, e-commerce and software-related unicorns are relying less on these rights because of their uncertainty. Unicorns seem to be spending on trademarks and branding, and protecting content, where appropriate with inexpensive copyrights. Trade secrets are a growing interest, too, because of the danger of employees leaving to go with competitors.
When it comes to IP rights, more important that where the unicorns are located is in which industries they operate.
Almost an Oxymoron
In the past, companies the size of the most valuable unicorns—ByteDance, SpaceX, and Stripe—would probably have already gone public, states Bloomberg. Today entrepreneurs feel less pressure to do so, given how easy it is for them to raise capital from private funders. Staying private allows businesses to avoid the additional scrutiny and potential loss of control that comes with an initial public offering.
In January, 42 startups became unicorns and four became “decacorns”—the clumsy nickname given to startups worth $10 billion or more. “When you have 1,000 unicorns,” says Brian Lee, who oversees research at CB Insights, “that’s almost an oxymoron.”
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Image source: CB Insights via Businessweek; illustration: Peter Crowther form Bloomberg