In recent years, the number of unicorns has increased rapidly: Startups that have a market value of more than one billion US dollars before going public or an exit. Jochen Butz and Kay Gallus analyze where there have been the most unicorns recently – and say whether the trend will continue.
Managing Director Jochen Butz and Kay Gallus, Investment Manager at HQ Trust, examined venture capital transactions in the past few years in the most important investment regions – the USA, Europe and Asia. The experts analyzed both the number of deals and their average volume.
Kay Gallus, Investment Manager at HQ Trust:
- “The number of unicorns has grown rapidly in recent years. While there were only 47 new Unicorns worldwide in 2015, that number has risen to more than 100 in 2020.”
- “The absolute number of Unicorns increased from 75 to 530 over the same period, and currently there are already more than 650.”
- “North America and Asia account for the majority of these mega-deals – these two regions have produced more than 85 percent of global unicorns to date, leaving Europe far behind.”
- “In the past two years in particular, U.S. unicorns have pulled far ahead. There were more than 70 new Unicorns in this region in 2020 alone.”
- “There is a tendency for non-traditional investors, such as sovereign wealth funds or investment banks, to participate more in the largest transactions in the market. This will reinforce the trend toward higher valuations and thus more Unicorns.”
- “Future exit activity is largely dependent on a robust IPO (initial public offering) environment, which has been the primary exit channel for unicorns recently due to the trend towards higher valuations.”
Jochen Butz, Managing Director of HQ Trust and Head of Alternative Investments:
- “Despite the higher number of unicorns, the venture capital market has changed in recent years.”
- “Since the dotcom crisis in the early 2000s, holding periods have indeed become somewhat more volatile. However, they have recently leveled off at around ten years between founding and IPO.”
- “Companies that reach high valuations are held in the portfolio even longer. In the early 2000s, these companies were sold much earlier.”
- “From a portfolio perspective, an admixture of venture capital can make sense – if the investor is aware of the risks. On average, 65 percent of all completed deals return less than the capital invested.”
- “Investing in the best managers matters a lot. Good funds not only have a higher number of successful investments, but also more monetarily successful investments.”
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