Unicorn Club

Posted By Darren Winters on May 15, 2019


Unicorn Club

Let’s zero in on the global unicorn club.

Investing in start-up unicorns is dicey, but if you have the means and are lucky or skillful enough to invest in a winner, then you’ll be reward with sizeable capital gains.

Investing in the global unicorn club could be a fast track to wealth creation, bearing in mind those on the rich list are either owners or investors in start-ups

So the route to serious wealth is not all about working every hour of the day or saving every penny like a miser it is about investing in businesses and assets. Put simply, capitalism rewards investors and it is a real pity that isn’t taught at school.

Investing in a start-up business today which has the potential to be tomorrow’s global unicorn club is both challenging and rewarding

So what defines a unicorn?

Unicorns I am referring to aren’t the mythical animal with a horn projecting from their forehead, although that too is a unicorn. The unicorns I am talking about are start-up companies that end up reaching a valuation of more than one-billion-dollars.

Investing early in a start-up which makes it to the global unicorn club is like picking the winning numbers in a national lottery

Unicorn Club

But the probability of being struck by lightning is greater than winning the national lottery.

So you have a greater probability of picking a winner by investing in a start-up that could potentially be in tomorrow’s global unicorn club. For example, investing $3,000 in just 3 stocks in the 1980s would have made you a millionaire.

If you put $1,000 in Apple in 1980, you would have $228,113. If a stock investor bought $1,000 in Microsoft in 1987, they would have $546,996, according to Standard and Poor’s Howard Silverblatt, who calculated as follows, using data through the end of 2016. Likewise, if $1,000 was invested in M&T in 1980 that investor would have seen his capital grow to $640,948 at (2016 prices).  A thousand dollars in 1980 is equivalent to $2,974.76 today. If you put $1,000 in Apple in 1980, you would have $228,113 (2016 prices).

Those who invested in cryptocurrency early have become millionaires. Just how many young millionaires cryptocurrencies have created in 2017 is unclear but the fact that Ferrari is planning to increase its production in 2018 due to a jump in demand for supercars gives us some idea.

So what are the positive signs that you are investing in a start-up that could make it to tomorrow’s global unicorn club?

Unicorn start-ups are typically rebels with a cause, they spearhead disruptive technologies.

Their founders are usually outsiders and hated by mainstream and established players because they challenge the status quo. Start-ups that could make it to tomorrow’s global unicorn club are  game changers.

The good news is that investing in tomorrow’s global unicorn club is getting easier because the number of unicorns is growing

The combined value of the world’s 326 unicorns has now reached $1.1 trillion. The startup boom intensified as capital flowed into private companies at an unprecedented pace.

Unicorn Tracker created by CB Insights, breaks down the global unicorn club landscape in 2019 by sector, valuation, and country

ByteDance is the world’s largest unicorn at a $75 billion valuation. The company owns Toutiao, a popular machine-learning enabled content platform in China that customizes feeds based on a user’s reading preferences. It also owns video sharing platform Tik Tok.

Analysts estimate that over 100 startups that have made it to the global unicorn club could IPO in 2019

Uber and Airbnb are on the list of potential IPOs this year. Already this year, Lyft and Pinterest have already gone public. Another recent unicorn to IPO was Zoom Video, a conferencing platform, which has seen shares increase 120% in price since its impressive mid-April kick off.

Two of the most common sectors in the global unicorn club are Internet Software Services valued at $153 billion and E-commerce $129 billion, according to current data as of March 2019. Fintech is the third largest sector with a valuation of $94 billion. Healthcare is the fourth largest sector for unicorns valued at $76 billion.

However, the segment most valued by investors is On-Demand, which includes companies like Uber, Didi Chuxing, and DoorDash.

The global unicorn club is occupied by unicorns from the US where nearly half the world’s unicorns come from there. China also has a large list of highly valued start-ups, according to March 2019 data. The US has156 unicorns, China has 94 unicorns (3 out of 10 unicorns come from China). In Europe, the UK has 17 unicorns, India 13 unicorns, Germany has 8 unicorns and South Korea 6. Outside of the six major countries listed above, the rest of the world only combines for a measly 32 unicorns, which is less than 10% of the global total.

The global unicorn club is dominated by seven unicorns, including Uber, WeWork, Airbnb, and ByteDance

Accounting for almost 30% of all of the value of the entire landscape, according to March 2019 data. The bottom of the pyramid amounts to $1-5 billion in valuation which holds 280 companies. Added together, they are worth $461 billion, which is equal to 42.5% of the unicorn total.

In short, investing in the next startup which makes it to the global unicorn club is a fast track to accumulating capital. Unicorn IP0s also generate a lot of investor interest and can also be lucrative. But it is those investors who get on board early are the one that tends to capitalize the most.

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