2019 Unicorn companies: Why they’re venture capital magnets

There are now around 326 ‘unicorn companies’ around the world. Since our January 2018 article, 119 new companies have joined the club.  Unicorn companies are privately owned startups with a valuation of US$1billion or more. These billion-dollar-babies owe their existence to huge amounts of venture capital. Who are the top 2019 unicorn companies, what makes them so attractive to venture capitalists, and what can Australian entrepreneurs learn from them?

Top 2019 unicorn companies

Topping the 2019 list of Unicorns is China’s Bytedance, an Internet technology company with a $75 billion valuation. It’s core product, Toutiao uses AI to deliver individually tailored news and media content. Uber is still the world’s second largest unicorn at $72 billion, with Chinese ride hailing competitor Didi Chuxing close behind at $56 billion.

The USA currently has the world’s most unicorns (around half) followed by China with around a third. Next are the UK and India with a modest 17 and 13 unicorns respectively. Australia currently has just two billion-dollar babies – Canva (drag and drop graphic design) and Airwallex (cross border payment technology).  See a list of 2019 unicorn companies here.

Venture capital – the lifeblood of fast growth

Unicorn companies like these consume massive amounts of funding to sustain their fast growth. Venture capitalists are happy to oblige, investing a staggering $19.2 billion in unicorns globally in 2018. In Australia, 2018 saw the creation of new Aussie unicorns Canva and Airwallex from successful capital raisings, with both companies raising millions more in March & May 2019 respectively.

While a unicorn’s success factors are varied and complex, there’s no doubt that characteristics like a strong founding team, unique product with huge market potential, and a global business strategy are a big attraction for venture capitalists.  For entrepreneurs aspiring to attract external funding, what does this tell us? Here are my six takeaways.

A strong founding team

  • Build a globally experienced team  It’s critical to have a team and broader network with experience in your target market and in scaling enterprises globally.  Many of the 2019 unicorn companies have been built by a technical and globally experienced founder supported by a team of talented co-founders with long term business goals.
  • Establish a business culture around a strong mission  Make sure every employee or contractor for your business is aligned with your company mission statement and lives and breathes it. The message needs to be loud and clear:
    WeWork  “Do what you love”
    Uber  “Transportation as reliable as running water, everywhere for everyone”
    Toutiao   “The only true headlines are the things you care about”

Unique product & service

  • Deliver something customers worldwide can’t live without  When people love a product, they will tell all their friends and family and seek to convert them. This is the golden word of mouth that first propelled Uber and AirBNB to unicorn status, and it’s hard to imagine life without them. Toutiao is the latest example of a product that people can’t live without. Toutiao tailors content from over 4,000 sources to the needs and behaviours of individuals. The result is a more personalised experience than local and global competitors can offer.
  • Solve millenial problems and change the world for the better  Millennial and Gen Z support is HUGE for any business that has a vision to create a more sustainable world, solve global problems, or improve our daily lives. The US’s Rubicon Global backed by Leonardo de Caprio is one example – it allows a business to order rubbish removal from a variety of waste haulers and helps them recycle more.

Massive market potential

  • Go global from the start  Australian and New Zealand markets just aren’t big enough. Your product or service needs to have a market potential that could result in at least $100 million revenues. Your technology and business model should also be scalable to meet this market, with roadmaps on how to get there.

Global business strategy

  • Have a presence where the money is   The venture capital market is strong in the US, particularly Silicon Valley. To help attract US venture capital, it helps to have a US presence. Do you have to leave Australia? No, there are ways to setup effective business structures and operations in more than one country. The combination of an accountant with international business experience and an entrepreneur mentor who has built and sold a startup in the US is key.

Accru Felsers specialises in international business structuring, taxation and regulatory management for fast growing businesses. We may not be able to turn your business into a 2019 unicorn company, but we can put in place the financial & tax structures you need for fast growth.

Please contact us if you are looking for an accountant and advisor to support your business journey.

About the Author
Katherine Buczynski , Accru Felsers Sydney
Katherine has over 14 years experience in the business advisory division with a wide range of experience across many different industries. She works with individuals, family groups and small-to-medium business clients, advising on effective tax and business structures, compliance issues, business structuring, SMSF rules and regulations, and strategic business planning.
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