The Future of the Billion Dollar Valuation: Unicorns Become More Scarce in a Shaky Global Economy

Of the millions of startups founded each year, only a fraction will become valuable enough to make a profit for investors. Venture capital, a type of private investment into new or expanding businesses, provides much of the funding for startups, and is well named; it’s the epitome of risky business.

Venture capitalists make these risky investments because they’re chasing a precious and rare beast: the unicorn.

What is a unicorn?

Unicorns are privately held startup companies with a valuation of at least $1 billion.

The term was coined by Aileen Lee in 2013, when she and her colleagues at the venture capital (VC) firm Cowboy Ventures counted just 39 startups that met their criteria: venture-backed startups in the United States (US) trading in consumer and enterprise software and valued at over $1 billion. That 39 was only 0.07% of all software startups in the US at the time.

The Website Planet research team took a look at startups with a valuation of $1 billion or more from 2007 till 2022. While the number of unicorns changes continuously with the changing valuation of companies, we found 1,964 unicorns worldwide. Nearly a third of these achieved their billion-dollar valuation in 2021.

Nearly 90% of startups fail, only 40% become profitable, and the chance of a company becoming a unicorn is a mere 0.0006%. This enormous unlikelihood of getting a valuation over $1 billion makes unicorns as uncommon as their mythical namesake suggests.

Once these companies return profits to investors – either by being sold to a bigger company (in an acquisition) or floated on a public stock market (in an initial public offering or IPO) – they’re no longer counted as unicorns. Venture capitalists call these “exits” – a chance for early investors to leave the company with a big pay day.

Unicorns and 21st century magic: The tech revolution

Many of the most successful companies since the 1990’s share a common trait: they all trade in information, using technology built by the previous generation’s most successful companies. The technological revolution marked by the invention of transistor chips, personal computers, and the internet created a fertile breeding ground for early tech giants to grow.

The rapid growth of companies like Apple, Facebook, Amazon, and Google is part of the reason that unicorns became increasingly common over the first two decades of the 21st century (although they were still a vanishingly small percentage of total startups).

The success of these megalithic companies influences the behavior of investors and their valuations for other tech startups.

Are fantastic valuations too good to be true?

While a tiny fraction of technology startups grew so quickly they made legendary profits for investors, a great many more did not. In fact, a good number of startups have been touted as the world’s next unicorn, only to fail to deliver. Theranos, and to a lesser extent WeWork, are famous examples.

These failures are cautionary tales. Startup valuation is an art as much as it is a science, especially in industries that rely on new technology and innovation to create new markets.

Startups trading in data and information technology often don’t even have clear revenue streams in place before they gain a billion-dollar valuation. The company’s past performance and growth potential, as well as the overall market’s growth potential, all factor into it. But until a startup is bought in an acquisition or floated in an IPO, its true valuation is little more than an educated guess.

The Dot Com Bubble was over 20 years ago – ancient history in technology terms. But will history repeat itself? Predictions about big systems like the internet, economy, and society are hard to make. But humans are easier to predict.

We are often overly confident, prone to lapses in judgment and logical blindspots, and apt to make mistakes. While new technologies will continue to make a very small number of investors rich beyond imagination, the majority of new ventures will never even turn a profit. Unicorns, it seems, may not be worth the hunt; they are an extremely rare breed arising from mysterious and mostly unknowable circumstances.

The latest data: An overabundance of unicorns?

The Website Planet team has compiled the latest data on unicorns around the world, including exited unicorns – startups that reached unicorn status during our research period (2007- 2022) but have since gone public, become bankrupt, or been acquired. To find privately held startups that reached a valuation of at least $1 billion, we used a variety of resources, including industry sources like CB Insights and PitchBook, CrunchBase, media reports, and more.

From this, we’ve created a snapshot of the valuation and ownership status of hundreds of companies. We used the most up-to-date data available, from the most reliable sources, and the information we found can tell us a lot about unicorns.

So, what did we find?

We found 1,964 privately held startup companies valued at $1 billion or more. We collected data on all companies that achieved unicorn status during the research period (2007-2022). Some lost their unicorn status by going public, being acquired or merging with other companies, or becoming insolvent. While the markets are in a constant state of flux, the largest unicorn at the date of publication is the Chinese company Bytedance (owner of the social media platform TikTok), valued at $360 billion.

What unicorns are worth

Combined, the estimated value of all the unicorns in our research is about $7.29 trillion: $7,294 billion, or $7,294,821,000,000 to be as exact as we can with the available data.

The average (mean) valuation is $3.71 billion, although this is skewed by a small number of massive unicorns like Bytedance (valued at $360 billion), Stripe ($152 billion), SpaceX ($127 billion), SHEIN ($100 billion) and exited unicorns – Alibaba Group ($167.6 billion) and Facebook ($104.2 billion).

Those few high-performing companies aside, most unicorns (1,571, or 80%) have an estimated value below the $3.71 billion average. The 393 (20.01%) above-average unicorns have a combined valuation of about $4.67 trillion, which is 64.1% of the total. Put another way, nearly a fifth of the unicorns on our list represent between one-half and two-thirds of the list’s total estimated value.

41.75% of researched unicorns are valued between $1.01-2 billion (excluding exactly $1B, for reasons we discuss later). Only 10 unicorns have a valuation of over $50 billion (0.51%).

Female founders are outnumbered but growing

Women are outnumbered by men in the ranks of unicorn founders. Only 161 (8.2%) unicorns in our research had a woman among the founders. Of those 161 unicorns with a woman involved in their founding, only 49 had no men in the founding team at all.

Researchers believe that gender bias plays a large role in this discrepancy, with venture capitalists favoring male-led companies over better investment opportunities.

But the trend is promising, at least. The first female-founded unicorns in our research reached unicorn status in 2013. Over 40.37% of the unicorns founded by at least one woman (65 companies) achieved their billion-dollar valuation in 2021, making up nearly 7.5% of the total new unicorn valuations in the year ($1,483.49B).

Unicorns with male and female co-founders have a higher average valuation than unicorns founded by only men or only women – $4.29 billion against $3.72 billion and $2.08 billion, respectively.

Don’t go your own way: Single founders vs co-founding teams

We found that a majority of unicorns were founded by a team, which subverts the trope of a singular visionary genius like Mark Zuckerberg or Elon Musk building a unicorn alone in their garage. There were 1,216 unicorns with a team of co-founders in our research, and 748 companies with a single founder.

The total valuation of co-founded unicorns is almost double the total valuation of unicorns founded by an individual – $4,707.8 billion and $2,586.5, respectively.

And regarding average valuation, unicorns with more than one founder were also slightly more valuable on average than unicorns with a single founder, with average valuations of $3.87 billion and $3.45 billion respectively.

What do unicorns do?

Few of the startups in our research specialized in a single industry. Most were generalists involved in several sectors at once, such as e-commerce and finance, or internet software & services and health. This made exact classifications difficult.

With this caveat, we identified 34 broad industry categories from the unicorns in our list.

Despite being well represented in the number of unicorns (66), Cybersecurity has a relatively low average valuation of $3 billion.

The industries with the highest average valuations (Aerospace & Defense: $10.32 billion, Health: $6.43 billion, Natural Resources: $5.78 billion, Consulting & Outsourcing: $5.66 billion, Food & Beverage: $5.48 billion, and Artificial intelligence: $5.40 billion) are skewed by a few major companies relative to their smaller pool of unicorns. There are only 15 unicorns in the Aerospace & Defense industry, for example, which is dominated by SpaceX.

But the Media & Entertainment industry, with a larger sample of 27 (1.37% out of the total number of unicorns researched) unicorns in total, has a relatively high average unicorn valuation of $5.04 billion – $1.33 billion more than the global average. Consulting & Outsourcing’s five startups, with an average valuation of $4.34 billion, are also noteworthy.

Internet Software & Services had the highest total number of unicorns. However, in 2017, 2019, 2021, and 2022, Fintech had the most number of companies reach unicorn status.

Where are the unicorns founded?

There are now unicorns in 57 countries, with the majority in North America (1,071), Asia (569), and Europe (228) while Oceania has only 11, and Africa has just 5.

Of the three most well-represented regions, Asia has the highest average valuation at $4.45 billion. North America’s average is $3.45 billion, while Europe’s is $3.24 billion.

The 11 unicorns in Oceania have the highest average valuation at $5.48 billion, 47.5% more than the $3.71 billion global average.

North America headquarters 1,071 unicorns – over half the total. The average valuation of North American unicorns is $3.45 billion, and their combined valuation is $3,696.35 billion. This gives North America 50.67% of the total unicorn valuation.

A report by Ernst & Young found several reasons that startups have better luck in some countries than others. These include access to funding, government investment in research and development, and high levels of education and training.

One of the most striking differences between countries is the presence and contribution of different industries. In the US, the most well-represented industry among unicorns is Internet Software & Services both in terms of the number of unicorns (242) and total valuation ($839.8 billion).

Canada’s industrial split is very similar to that of the US. Internet Software & Services companies represent the most unicorns (7 out of a total of 27 Canadian) and combined value ($11.27 billion out of $61.6 billion).

E-commerce unicorns are leading in China (49 out of 385 total Chinese unicorns). However, E-commerce is on the #3 spot by the combined value of unicorns per industry – $275.96 billion against Artificial Intelligence and Internet Software & Services with $429.04 billion and $324.99 billion respectively.

In Europe, the UK and Germany are both hubs for Fintech unicorns, which represent the most unicorns (27 in the UK, 10 in Germany) and the most combined value for any industry in both countries ($155.84 billion in the UK, $31.84 billion in Germany). The other big European market, France, has more E-Commerce businesses (6) contributing more combined value than any other industry.

Israel hosts 7 of the 66 Cybersecurity unicorns, second only to the US. Cybersecurity also contributes the greatest amount of combined value to Israel’s total.

There are 406 cities that headquarter unicorns around the world, but over a third of all unicorns (671) are located in the top five cities: San Francisco, New York City, Beijing, Shanghai, and London.

We compared the list of cities that headquarter unicorns against the Innovation Cities Index 2021. This index uses 162 indicators in three broad categories (cultural assets, human infrastructure, and networked markets) to rank cities according to how well they support innovation in business.

Most of the higher-ranked cities in our list (in terms of total valuation as well as numbers of unicorns) scored high in the Innovation Cities Index. This correlation is consistent with the report by Ernst & Young, which found that startups fare better in areas with the resources to invest in research, development, and training.

But there are some notable exceptions. Bengaluru, India, which is home to 34 unicorns with a combined valuation of $115.08 billion, does not feature on the list. And Tokyo, which is number one in the Innovation Cities Index Rankings, only has 13 unicorns with a combined valuation of $34.8 billion.

70 (71 if you count San Francisco and San Jose separately, as we did) of the 100 cities recognized for innovation in the 2021 rankings are the headquarters of unicorn companies.

Age of unicorns

The oldest company to achieve unicorn status was Otto Bock Healthcare – it reached a billion dollar valuation in 2017, 98 years after its founding.

Most of the companies in our research reached unicorn status at the age of 4-6.

223 companies (11.35%) became unicorns at the age of 4, and 222 companies reached unicorn status at the age of 6. Somewhat fewer – 218 companies (11.1%) – became unicorns at the age of 5.

81.92% (1,609) of the companies in our research became unicorns in the first 10 years after founding. Only 24 companies (1.22%) were lucky enough to reach unicorn status the same year they were founded.

2021 was a bumper year for new unicorns

While there is no magic formula that makes a unicorn, their creation in 2007 shows a steady increase and, of the 1,964 we studied, nearly a third (665, or 33.86%) achieved unicorn status in 2021.

Only 11 companies that still count as unicorns got their billion dollar valuations between 2007 and 2013. Then, the birth rate fluctuated between 2014 and 2017. In 2018, it more than doubled the previous record year to 116 before plateauing for three years.

Then, in 2021, the rate of new unicorn births nearly quadrupled, and the total number of unicorns nearly doubled.

However, that bumper year for new unicorns wasn’t sustained as we look at data for 2022.

While we don’t want to speculate too much about causation, the IMF has noted an uncertain economic outlook due to rising inflation, the threat of war, and continued slowdowns due to COVID-19.

And it bears repeating: valuation for many technology startups is based on (mostly educated) guesses. A statistically improbable 24% (157 of 665) of the companies that achieved unicorn status in 2021 were valued at exactly $1 billion. Given the financial incentives investors have in their venture achieving unicorn status, a critic might view their value with a healthy degree of skepticism.

Decacorns: The rarest beasts

Under perfect circumstances, a unicorn grows into the rarest of startup beasts: a decacorn.

Decacorns are privately held startup companies valued at $10 billion or more. Among the 1,964 unicorns we found in our latest research, there were just 105 decacorns (or 5.35%).

The largest six are relatively well known and spread between China and the US. All of them have a valuation of over $100 billion. A combined valuation of the top 6 decacorns ($1,010.8 billion) is 51.10% of the total valuation of the remaining 98 decacorns.

Bytedance is best known in the west for developing TikTok, which gained 3 billion downloads and reached a third of the world’s social media users between 2017 and 2021. Douyin, a similar app specifically for the Chinese market, is also dominant in terms of market share.

Elon Musk’s SpaceX is one of the few engineering and hardware-focused companies in the ranks of unicorns today, yet it is the second most valuable. This is due in large part to the fleet of nanosatellites SpaceX plans to deploy in the coming years, which will gain it a sizable chunk of the world’s data transferring capacity.

Alibaba Group is known for being a competitor to Amazon and eBay, but has diverse holdings in many sectors across the globe, and has the ninth-highest global brand valuation. In 2014 it went public with a market value of $231 billion, setting the then-record for the largest IPO in history.

Stripe, the checkout solution provider, gained a huge share of the market very quickly after it launched in 2011. Now, some 18.76% of all checkouts around the world are powered with Stripe products.

Facebook, rebranded as Meta Platforms in October 2021, has a monthly active user base that equates to more than a third of the world’s total population. It went public in February 2012 with an IPO of $104 billion – which at the time set the record for largest IPO in history.

Internet Software & Services and Fintech  companies are by far the most represented in the list of decacorns – 22 and 23 decacorns respectively. Together, this represents over 40% of the total number of decacorns. 65 out of 105 decacorns are active; the other 40 have exited.

Some active unicorns are anticipated to become decacorns in the next few years. The UK-based event technology platform Hopin was founded in 2019, achieved unicorn status the following year, and was already valued at $7.75 billion by the third quarter of 2022.

Swedish battery developer Northvolt is another unicorn that could soon reach decacorn status. Founded in 2016, it reached its billion-dollar valuation in 2019, and was valued at $9.08 billion in the third quarter of 2022.

Including Northvolt, at the time of writing only 10 privately held startups are valued at $9 billion or more. Any of these may also tip the scales in the next few years and join the list of decacorns.

Unicorns are not going away

Our data showed a breakthrough year in new unicorn valuations in 2021. And while 2022 was still the second-strongest year in our dataset, it saw fewer than half the number of startups achieve unicorn status as did the year before. Notably, 2022 was a year with high inflation in major markets, and other global concerns, and highlights some of the volatility in venture capitalism.

The Dot Com Bubble is a cautionary tale, and the perils of chasing fantastic valuations all too clear. Tomorrow is unknowable in the fantasy realm of venture capital. And – while their numbers are still growing – unicorns remain elusive for a very good reason: a billion dollars is a vast sum of money, representing a huge share of a market or a remarkable value proposition.

Methodology

Website Planet’s research team studied startups that achieved unicorn status between 2007 and 2022. We defined our research period beginning with some of the earliest discussions of privately held companies valued at over a billion US dollars, up to the time of publication. Our goal was to analyze the trends behind unicorn valuations in order to look for their commonalities, to track the growth in their total valuations, and to see if they are still as rare as they used to be or if they are becoming more common. Using all the tools available to us, we collected a comprehensive list of 1,964 unicorns and researched their details including years, growth, locations, and industries, as well as public details of company founders.