When companies outgrow unicorns, what should we call them?
The number of private companies worth a billion dollars or more is at an all-time high, and the biggest have surpassed their description as “unicorns”.
It is no longer uncommon to see private companies valued at $10 billion or more, far larger than those that first earned the unicorn name.
Recent examples include corporate credit specialist Brex Inc., valued at $12.6 billion, institutional market maker Citadel Securities’ $22 billion valuation and private market valuation of $40 billion. for digital payments processor Checkout Ltd.
Then there’s ByteDance, TikTok’s parent, valued at $140 billion; Elon Musk’s SpaceX, valued at $100 billion; payments company Stripe, valued at $95 billion; and $42 billion for Epic Games, owner of “Fortnite.”
In total, CB Insights reported 659 private companies valued at $1 billion or more as of December 31, a 69% increase over the past year and an all-time high.
The term unicorn is usually attributed to Aileen Lee, a former Kleiner Perkins Caufield & Byers investor, who founded venture capital firm Cowboy Ventures in 2012.
In 2013, Lee wrote an article, “Welcome to the unicorn club: learning from billion-dollar startups. »
The term caught on.
Lee did not respond to a MarketWatch request for a unicorn name update for large private companies.
CB Insights has seen the term “decacorns” being used to describe companies valued over $10 billion, and “hectocorn” has been used for those valued over $100 billion. Neither nickname attracted a huge following. Neither does the term “dragon”, as proposed by others.
Curtis Mo, a partner at DLA Piper who works on securities law in Silicon Valley, said none of the names seem to have the obvious ringtone or meaning of unicorn.
“I usually hear people refer to unicorns over $10 billion as ‘unicorns,’ ‘decacorns,’ or ‘dragons,'” Mo said. “super unicorns”, sometimes over $100 billion or sometimes [larger than] another great threshold.
Marcus Bolsinger, a partner at Dechert and co-head of the firm’s private equity practice, polled his family members to see which term was generating the most buzz and came up with the terms “Alicorn” (Unicorn with wings) or “Pegasus”.
Whatever the name, Bolsinger said private companies are able to raise billions of dollars in funding through private equity sales and other equity transactions without having to go public. He sees a pipeline for more of these private mega-companies in 2022 given the tough IPO environment.
Some private companies are so big that they don’t even need to raise funds in an IPO and instead choose to go public through a direct listing.
Coinbase Global Inc. COIN,
the cryptocurrency company, reached a market capitalization of $86 billion when it went public in early 2021 via a direct listing. For comparison, that’s more than most S&P 500 companies.
F-Prime Capital, the member-backed venture capital firm of Fidelity Investment parent FMR LLC, sees fintech companies as a booming sector for mega unicorns.
In 2014, fintech companies accounted for about 10%, or $10 billion, of the total universe of private startup funding. In 2021, the sector attracted $119 billion in investments for a market share of 34%, according to a recent study by the firm.
The firm has also compiled a Fintech Index of 54 publicly traded companies in the sector with a combined market cap of more than $690 billion as of Monday. Some components include Coinbase, Flywire Corp FLYW,
and Hippo Holdings HIPO,
Some large private companies that could qualify for the index include Stripe, Klarna, Plaid and Checkout, according to the study.
“We think 2022 is going to be a very strong year and fintech still has a lot of legs,” said David Jegen, managing partner of F-Prime Capital Tech Fund.
Although public markets corrected in 2022 and fintech stocks lost around 40% of their value, these movements did not affect seed investments, which are the focus of F-Prime Capital.
“We continue to see new businesses in payments, crypto and banking and will be very active,” Jegen said.
Facebook scored a first full-size unicorn
One of the first high-profile examples of this type of large private enterprise was Facebook, now renamed Meta Platform Inc. FB,
Facebook had reached a valuation of around $16 billion in 2010 and went public in 2012 with a market capitalization of over $100 billion.
Accel Partners, which invested $98 million in Facebook in 2005, ended up selling about $2.2 billion in shares during Facebook’s IPO and held an additional 143.65 million shares after its Initial Public Offering.
For now, the term unicorn continues to be widely used, including a red origami unicorn depicted in the recently published book, “The Power Law…Venture Capital and the Making of the New Future” by Sebastian Mallaby.
When asked which term he was leaning towards, Mallaby replied, “Decacorn?”