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Pinned 3 months 3 weeks ago onto Venture Capital

Unicorn Hunters

Source: https://venturebeat.com/2017/04/22/is-this-the-end-of-venture-capital-as-we-...

Unicorn Hunters - Sequoia Capital, Tiger Global, Fidelity, Wellington, & SV Angel

'According to an analysis by CB Insights, there are a total of 185 private companies which form the global unicorn club as of February 1, 2017. Nine more since the data analysis company last counted on October 20, 2016. (Unicorns, in startup terminology, are those companies which have a valuation of over $1 billion.) Sequoia Capital which has been one of the most active investors in unicorns is now hedged on both sides by two other global biggies - Tiger Global Management and SV Angel. Both these investors have quickly made additions to their unicorn portfolios and now boast of as many unicorns in their kitties as Sequoia - 23.

In a blog post, CB Insights says while the playing field is expanding rapidly, so is the interest of the unicorn hunters. A telltale sign being that two of the top eight investors are public market investors known for putting their money into safer bets like mutual funds, asset investment banks, and such. However, the unicorns have managed to attract these traditional investors over to their side - Fidelity Investments now has 20 unicorns in its portfolio while Wellington Management stakes claim to 19 of them. The total number of traditional investors who preferred safer investment avenues but are now playing in the wilderness of the startup world has also increased from 70 last October to 76 in February.

The competition is intensifying with more global investors jumping into the fray, fighting to grab their share of the unicorn pie. In fact, eight of the top global investors have put in their money in Airbnb which stands valued at a massive $30 billion. What's more SV Angel continues to build on its unicorn booty by betting on early stage startups. The San Francisco-based angel firm continues to be the top most early stage investor by identifying 16 prolific startups in the seed and the Series A rounds which went on to join the unicorn club. Sequoia Capital retains its second spot with 10 such unicorns. Catching the unicorns early on ensures these investors of a bigger reward when these companies make their exit.

According to CB Insights data, among the top investors, it is Tiger Global that plays it the safest with only two of its unicorns being in the early stage investments, Y Combinator identified all of its seven unicorns while they were still green. First Round Capital and Lowercase Capital are two other investors who have gone to the market with their money pouches in search of the potential unicorns. On the other hand, there are 30 investors who have waited for the startups to develop into unicorns before trusting them with their money, including two of the top 10 - DST Global and Fidelity Investments, says CB Insights.

With more public investors putting their money into unicorns and more investors helping these startups enter the unicorn club with their early stage investments, the market seems to have accepted this new breed of players. Also, with star exits like AppDynamics, which Cisco acquired in January 2017, for a whopping $3.7 billion no investors can continue to ignore these unicorns. And, with highly valued unicorns like Airbnb rumoured to be getting ready for an IPO, nor can they afford to.'

+ Billion dollar startups: Who has the maximum Unicorns in its kitty? (2017):
+ http://economictimes.indiatimes.com/small-biz/startups/billion-dollar-startups-who-has-the-maximum-unicorns-...

'Realistically, a “venture” fund nearing $600 million in size is already beyond the limit of being able to make real venture stage investments. Why? Very few funds (Sequoia, Andreessen Horowitz, Kleiner, and a few others) get to invest early in the highest value companies. Among CNBC’s 2015 Disruptor 50 list, Kleiner alone was an investor in 15. On CB Insights’ list of unicorns, only three venture firms feature in the most active group (the rest are late stage investors). Any venture firm NOT in the top group doesn’t have the opportunity to invest early enough in high-value companies to deploy a large $500-700 million venture fund successfully.

Companies generally need less money to scale now compared to a decade ago: AWS, cloud software, app stores, and development in low-cost markets have cut the cost of scaling a business by 50 percent or more vs. 10 years ago. For example, Facebook only had 3,200 staff when it IPO’d for $100 billion. Less capital needed equals less venture money required. Finally, there is now a ready market for large late-stage rounds. Many companies are staying private much longer and raising “mega rounds” before IPOing (witness AirBnB’s $1 billion round in Q1 2017). An unfortunate side effect of these mega rounds is that, as funds become driven by larger momentum investments, less interest and attention is paid to “ordinary” venture investments going to the potential unicorns of the future.'

+ Is this the end of venture capital as we know it? (2017):
+ https://venturebeat.com/2017/04/22/is-this-the-end-of-venture-capital-as-we-know-it/

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