Before 2013 the obvious answer to that question would have been ‘mainly in the vivid imagination of a child’.
Today, unsurprisingly, almost 50% of all unicorns live in the US with a further 25% in China. Europe accounts for 12% of the total. Of this the UK and Germany, with 20 and 10 unicorns each, is around 2/3rd of the total.
In total there are 136 Asian unicorns, far ahead of Europe's 46 and not doing poorly compared to the US with 192. India has a respectable 19 unicorns – 5% of total. Given the size of the population and the increasing affluence this is a figure that, like in China before it, most expect to increase significantly in the future. But, more on this in a future post.
Exhibit 1: Unicorns live worldwide but mainly in the US and China
Source: PE Compass, August 2019, data from CB Insights, as of August 2019
Five drivers of the venture unicorn population boom
The unicorn population boom is caused by some of the same factors that are generally causing asset inflation.
A prolonged low cost of capital facilitating raising abundant cheap capital
The hunt for yield causing investors to put more capital to work in private markets
Non-traditional venture investors, e.g. hedge funds, investing especially at later stages
Increased investor patience that allows companies to stay private longer
‘Blitzscaling’, driven by the belief that software will disrupt all industries and create one or two champions in ‘winner-takes-all’ markets makes it about growing as large as possible as fast as possible
To these points I would add irrational exuberance and fear of missing out among investors.
After a historic long expansion period both are perhaps inevitable. But this may for the same reasons also end poorly for less experienced and especially later-stage venture investors.
Investments made based on shaky assumptions, in companies who’s business models have had limited stress testing, with significant cash-burn, and with limited to no visibility of profitability or an exits may not fare well in a down turn or for that matter under the increased scrutiny of public markets.
I will return to the subject of venture, unicorns and risk in future posts.
Exhibit 2: Where I keep my unicorns - if it was only that simple!
Source: PE Compass, August 2019
Sources: CB Insights, August 2019