Tag: Unicorns

2018´s Industry Recap and 2019 hottest industries for Venture Capital

2018 was a historical year. Last year saw the highest level of venture capital funding since 2000, the last year of the dot-com bubble.

According to data published by PitchBook and the National Venture Capital Association, Venture Capital firms spread roughly U$S 131 Bn. across 8.949 deals.
The previous record was a $100 million total notched in the year 2000.

More than a half of the total capital invested came from U$S 50 M (or more) deals. This boosted the average deal size and valuations across every investment stage and series last year. But because venture investors are paying so much up front, it’s becoming harder to profit.

382 fundings were U$S 100 M (or more) “megarounds,” up from 266 in 2017, with 184 of those coming from the U.S.
In terms of “unicorns,” companies with a valuation of at least U$S 1 Bn., the U.S. saw the creation of 53 new ones in 2018 versus 29 in 2017.
The fourth quarter alone saw 21 “unicorn births,” the highest ever recorded in a single quarter.

Venture capital investments in Asia rose 42% in 2018 versus 2017 with an 11% increase in the amount of money invested. Asia broke records with a 35% in “megarounds”, to 162, and a 60% jump in the creation of unicorns, with 40 coming of age during the year.

California, Massachusetts, and New York continue their dominance of venture investment activity, attracting 79% of total U.S. capital invested and 53% of the number of U.S. deals completed last year.
VC funding in the San Francisco region jumped 55%, to U$S 28 Bn., and New York funding reached U$S 13 Bn.
Venture Capital firms and investors point to increasing operating costs and higher valuations in those three states, signaling optimism for more investment in emerging ecosystems, which also have the benefits of a growing talent pool, maturing networks and ecosystems, and more favorable pricing.

VC Trends

Artificial intelligence, digital health and financial technology companies led the investment portfolios, with AI-related funding jumping 72%, to U$S 9.3 Bn.

Software continues to eat the world but life science activity has seen significant growth.
More than U$S 23 Bn. was invested across 1,308 deals in life science startups, a record high for both metrics.
Healthtech drew a significant portion of angel/seed investing in 2018Q4, highlighting investor interest in funding groundbreaking technologies to meet some of the biggest challenges and opportunities in the sector.

New Unicorn Wannabe

A number of Venture Capital (VC) investors are predicting 2017 to be the year when a large amount of money will flow into startups, especially if those startups have the opportunity to become “Unicorns”. Although, 2016 was not the best year for the startups as 70 percent reduction was observed in the companies that made it to unicorn status, 2017 seems quite promising.

For example, a number of VC firms, including Founders Fund and Andreessen Horowitz, managed to raise around $40.6 billion – a huge sum of capital needing to be deployed.

 

Rising Trend of Unicorn Companies

A rising number of unicorns from different industries have made it big.

  • Uber – Transportation service
  • Xiaomi – Consumer electronic
  • Airbnb -Lodging services
  • Snapchat – Social media
  • SpaceX – Aerospace

The marketplace for used goods has also picked up the pace during the last ten years as a number of startups have emerged in the market, such as OfferUp, 5miles and OLX.

 

Boom of the Unicorns in the Used Goods Marketplace

The online market for used goods has dramatically increased over the past decade as more and more e-commerce companies have made their entry. Encouraging the users to get rid of the items they no longer need, these companies have created a multibillion dollar market.

Recently, Letgo, a company that allows users to purchase and sell products secured $175 million in new financing. It has previously grabbed on to $325 million since it was initially launched and is currently approaching one billion dollars in valuation.

Moreover, some of the big unicorn names like Facebook launched a Marketplace Tab on the lower bar of its mobile application that allows quick access to shopping and selling on the basis of location. This goes to show how it is planning to penetrate in the e-commerce industry rather more aggressively.

 

LatAm Unicorns – Making it Big

On the other hand, in Latin America, some of the talented entrepreneurs are hosting five of the world’s biggest Unicorns ($1 billion in valuation). Although, the list of tech startups founded in Latin America is short, yet, these companies have made it possible for other new entrants to envision themselves as growing on a global scale. Argentina is the only country in Latin America with 4 (soon to be 5 with Letgo) out of 6 Unicorns. Those Unicorns are MercadoLibre, Despegar, OLX and Globant.

MercadoLibre is an online company from Argentina that is involved in online auctions and e-commerce. eBay made a strategic alliance with this company back in 2001. Apart from Argentina, the company currently has its presence in Colombia, Brazil, Costa Rica, Chile, Mexico, Dominican Republic, and a lot of other countries.

B2W is another name in the same sector. It was founded in 2006 and its headquarters are based in Rio de Janerio. B2W is a retail company that came into existence as a result of a merger between Americanas.com (holding a control share of around 53 percent) and Submarino.com (controlling the remaining percentage of share). The market-share of a company in the year it was founded was almost 50 percent of the online sales sector in Brazil.

Similarly, another renowned Argentine unicorn company from the e-commerce sector is OLX, which was founded by Fabrice Grinda and Alec Oxenford in 2006. Its headquarter is based in New York. The company is currently operating in more than 40 countries around the world.

The total number of internet users in Latin America is closer to the users in the U.S., but it has shown rapid growth in the past couple of years with the growth rate that is 8 to 10 times more than the U.S. rate. It means that the potential for new startups to make it big is huge in this region. Besides, there is a strong institutional and government support for entrepreneurial companies, which can further increase the expected number of unicorns in that area.