The World's Most Valuable Unicorn Companies
What is a unicorn company?
A unicorn company is a private company with a valuation over $1 billion. As of September 2020, there are more than 400 unicorn companies around the world. Variants include a decacorn, valued at over $10 billion, and a hectocorn, valued at over $100 billion.1
There are now hundreds of unicorn companies within the private market. Some will surely flame out. But perhaps some will become the next Apple or Facebook, companies that grow to a gargantuan size.
Getting in early enough with one of those businesses has made investors' careers in the past. And at a growing rate, private equity firms are taking notice, backing companies at earlier stages than normal in pursuit of a windfall. The past few years have brought an explosion of PE investment in unicorns, per PitchBook data, with deal count quadrupling and the value of those deals expanding at an even more extraordinary rate.2
Private companies are going public much later as matured businesses, if at all, and most of their growth is occurring in a private format. The average age of a company at IPO has nearly doubled since 1980: 6 years old in 1980 and 10 years old in 2019 at IPO. Median age for tech companies going public in 1999 was 4 years, respectively, compared with 12 years in 2018.3, 4
IPOs may soar, should you get in before?
- Hunger for growth in a low-interest-rate environment and a shift of favor toward technology companies have helped fuel significant interest in IPOs this year, and Snowflake’s first-day performance is likely to add even more hype. Snowflake was one of the most hotly anticipated tech offerings among software and cloud-data investors.5
- There are several prominent tech unicorn companies that are expected to list their shares in the coming months as the tech industry thrives amid the pandemic-induced economic downturn. After a lull in IPOs during the volatile early months of the coronavirus crisis this spring, new listings roared back over the summer and have accelerated in recent weeks, even as tech stocks hit some recent turbulence.6
- The pandemic may have dampened some spirits, but it hasn’t always put a hit on companies, especially those in the tech sector, such as software-as-a-service (SaaS) stocks. In some cases, the pandemic has actually strengthened the hand of some tech companies, accelerating the market dynamics, such as digitalization, that make them a more valuable investment.7
- During the week of Sep.14, the software companies Sumo Logic, American Well Corporation and Unity Software went public, along with JFrog, which listed its shares on Sep.16. Together, the debuts represented a private market value of more than $78 billion.6, 8
- Other companies are also rushing to get out ahead of the Nov. 3 election, which could lead to more volatility. They reportedly include Airbnb, the home rental company; DoorDash, the on-demand delivery provider; Wish, an e-commerce site; Palantir, a data analytics start-up; OpenDoor, a real estate marketplace; and Asana, a collaboration software provider.6, 8
- CB Insights, Aug 2020. The World's Most Valuable Unicorns
- PitchBook, May 2018. Unicorns Are Taking Over Private Equity
- Initial Public Offerings: Median Age of IPOs Through 2017, June 13, 2018
- WSJ, March 2019. The 2019 IPO Frenzy Is Different From 1999
- WSJ, Sep 2020. Snowflake’s Stock Price Soars in IPO
- The New York Times, Sep 2020. Snowflake More Than Doubles in Debut as Wall Street Embraces Tech IPOs
- Bankrate, Sep 2020. IPOs have gone red hot in 2020
- Barron’s, Sep 2020. Cloud Software Firm Snowflake Leads a Slate of Tech IPOs on the Horizon
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DISCLAIMER: This industry information and its importance is an opinion only and should not be relied upon as the only important information available. No representation is being made that any investment will or is likely to achieve profits or losses similar to those shown or described. Performance will vary based on many factors, including, but not limited to, investment strategies, taxes, market conditions, and applicable advisory and other fees and expenses related to investing.