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The Unicorn World Order

The presence of the most coveted mythical creatures of the business world might be an indication of economic power, or even beyond - of prescient macro initiatives, pure luck or even geopolitical and proxy alignments for decades to come.

Unicorns, legendary creatures, described since antiquity as beasts (in the Western culture mostly horses) with a single large, pointed, spiraling horn projecting from its forehead are as rare in the world of contemporary business - they are privately held startup companies valued at over $1 billion. Since Aileen Lee coined the term in 2013 there were other monikers assigned to different types and sizes of companies but none had the stickiness of the 'unicorn'. Unicorns are a symbol of economic power, capitalist success and pride for their founders, employees, investors and sometimes for entire geographies and groups of end-customers.

Unicorns are decisively not the only measure of an economic success of an ecosystem but like many other things in this report, they are indicative, some might argue - extremely indicative. Unicorns are usually funneled from an ecosystem that is composed of countless smaller startups, failed projects, amount of venture capital and angel investors, availability of engineering and business talent, friendly business environment, multitude of events and meetups. The leading startup market intelligence company CB Insights claims there are 532 unicorns globally and, despite some significant changes have already occurred since their report, for the purposes of this article it will be used as a baseline.

TikTok Towering All

Starting with the really big, gigantic players here are the ten biggest unicorns by size led by the Chinese company ByteDance, the company behind the globally famous social media video craze TikTok. Distant second is yet another Chinese company, the ride-sharing emperor of China - Didi Chuxing, followed by five US unicorns including the industry leaders and pioneers like Stripe and SpaceX. With respect to UiPath, a platform for robotic process automation (RPA), they are originally a Romanian company but now headquartered in NYC. Somewhat of an intruder in this US-Chinese duopoly is the Brasilian challenger neobank - Nubank. All of the top ten unicorns are in fact decacorns - privately owned companies valued at over $10 billion. The top 31 of the 532 unicorns, or almost 6%, are in fact decacorns. The Ant Group, an affiliate company of Alibaba, which in late 2020 was going for an IPO which would bring its valuation to an incredulous $313 billion is however not on this list. The IPO itself was blocked by Chinese regulators.

The Age of Fintech

The missing giant, Ant Group, is a fintech company which is a category with most unicorns - 79. As much as these categories and industry verticals are loosely defined and very often overlapping this is another telling graph. Financial technology as a category is followed closely by internet software and services (77) and e-commerce (66). Artificial intelligence (AI) is catching up to the hype of recent years but so are many other verticals. Curious is the position of edtech (education technology) which is third to last but this will surely change in the coming years, especially due to the effects of the COVID-19 pandemic. Fintech has started its rise quite some time ago and it will be interesting to see which industries will take the lead next.

Softbank Above All (Or Is It?)

When it comes to top ten investors that invest in unicorns, another duopoly - starting to notice a pattern - infiltrated. This time the intruder is none other than the brainchild of the Japanese entrepreneur & investor Masayoshi Son - SoftBank. SoftBank did not only top the list with 35 unicorns invested and left the other nine positions to US and Chinese investors in a split 2:1 for the former but they reached that position in record time. Mr. Son's investing rationale has been put the test in recent years but his ability to raise, spend and earn gargantuan amounts of money seems to be as present. However, if merged, Sequoia Capital (31) and its Chinese affiliate (26), they would be a new overwhelmingly convincing top investor by number of unicorns invested. In addition to Tencent (23), the company behind the Chinese mega app WeChat, other famous venture capitalists - Accel Partners (26), Insight Partners (20), Tiger Global (19) and Andreessen Horowitz (17) - have made the top ten list of select investors by numbers of investments in unicorns.

Duopoly Unscathed

A global duopoly, already mentioned, is a staggering representation of the only two economic and technological superpowers by its size. These graphs are a testament to it. Of the current 532 unicorns globally, 381 or 72% are headquartered in the US and China. The remaining 28% or 151 unicorns are split between 29 other countries.The disproportion and size of the the two markets and megapowers is evident.

The situation is marginally less dominant with select investors into unicorns. Out of 684 of such investors 476 or 70% of them are headquartered in the United States or China. Hong Kong is not included in this count, but this autonomous region of China has another 16 of such select investors which would bring the total number to 492, or - 72% again. Nevertheless, it must be pointed out that with the investors the situation is a bit murkier. Many investors choose as their base a place most convenient in terms of legal and business circumstances while their limited partners (LPs) and the flow of money is of the most varied provenience, often different to their place of business.

A Global Snapshot of Unicorns

The dominance of the United States and China is skewing the rest of the world in apparent insignificance in nominal terms. Of the vast majority of unicorns the above explained duopoly has, the US dominance is even more impressive. They host double the amount of unicorns than China - 320 for the former and 156 (160 with Hong Kong) for the latter.

If the graph for the rest of the world is zoomed in, after we take the colossuses that the US and China are, some old and some upcoming powers are topping the list - the UK and India (26 both), followed by Germany (15) and South Korea (11). Brazil follows with 9 unicorns but a relatively smaller country takes an impressive position - Israel, which dubs itself as startup nation, with 8 unicorns. The rest of the list showcases some smaller and bigger countries alike, but all very bullish on the tech sector. Moreover, there are a lot of countries missing from this list - some former powers some big up-and-coming economies, but if they want to make this list they might have to wait a bit more.

Impact Over Size - The Story of Unicorns

Adding some traditional metrics like number of inhabitants or size of economy might provide an entirely different picture. if we include the number of inhabitants, suddenly an unlikely candidate tops the list - Luxembourg. The small Western European country counts almost 1.6 unicorns per million inhabitants followed by Israel (0.92) and only then the gigantic US (0.78). Engaged ecosystems like Singapore (0.51 unicorns per million inhabitants) are joined by unlikely candidates - Estonia (0.75), Lithuania (0.37), Uruguay (0.29) and Croatia (0.24). Larger countries, like France, China, Brazil, Japan, India and Indonesia are pushed towards the bottom of this graph.

When taking the size of the economy as a measure the image somewhat changes. Israel (2.09 unicorns per Int$100B of GDP) tops the list and smaller economies are unsurprisingly rewarded. Estonia (1.94), Luxembourg (1.33), Uruguay (1.29), Lithuania (0.94) and Croatia (0.82) are all in the top ten including the US (1.21) and the UK (0.80).

Combining the number of inhabitants and the GDP we get a more equitable metric - GDP per capita. When both the size of the economy and the size of the country is taken into account the US-China duopoly is joined by another ecosystem of outstanding potential and growth - India. China, due to its smaller per capita economic strength, tops the list with 748 unicorns per each 100 thousand of International Dollars (Int$) per capita, followed by the US (400) and India (373).

The rest of the world, in this metric paling in comparison to the top three countries, is led by Brazil (59), the UK (54), Indonesia (41), Germany (27), South Korea (25) and, once again, Israel (18). The top ten globally is wrapped with the only African country with unicorns - South Africa (16).

The Flow of the Money - A Different Perspective

The category of select investors is likely not as accurate due to the selected investors themselves are most of the times not all of the investors into a unicorn, the stage they invested might be very different, so is the amount invested. However, the situation at glance is not unlike with the number of unicorns - the US counts 320 of such select investors and China 156 (172 if we take Hong Kong into account) followed by a huge gap before the rest of the world shows up.

The entirety of the rest of the world has 207 such investors, a bit more than China, and the list is topped by the United Kingdom (37), Japan (18) and Germany (18). Out of 36 countries with select investors in unicorns 14 have only one investors and some interesting countries can be spotted among others - Liechtenstein, Mauritius, Georgia, Saudi Arabia, Portugal and Mexico.

Similarly to the exercise with unicorns, the amount of select investors can be put into a relative perspective against the size of the country by the number of people and the size of its economy. Dividing the number of investors by the number of inhabitants Hong Kong finds itself atop of this list (Lichtenstein would be an absolute winner by orders of magnitude but it is an extremely small country and has only one select investor in unicorns). Financial hubs like Luxembourg (1.60), Switzerland (0.58) and the UK (0.55) are all within the top ten countries. The US is 5th with 0.97 and the omnipresent Israel is one position above with 1.50 investors per million inhabitants.

Dividing the number of unicorns by the size of respective economies Hong Kong is topping the list again (3.42 investors per Int$100B of GDP), closely followed by Israel (3.40). Mauritius (3.30), due to its only select investor into unicorns is firmly third before Singapore (1.73) and former Soviet republics Georgia (1.72) and Latvia (1.62) whose 1 investor allows them to be positioned high. The duopoly duo is slightly lower on this list - the US is 7th (1.49) and China is 12th (0.67).

The last comparison measures the number of select investors in unicorns with respect to GDP per capita in PPP terms. As in the same metric with unicorns three largest countries by number of inhabitants take the first three place followed by a larger gap before the rest of the world. China (957 select investors in unicorns per Int$100K of GDP) overshadows the US (494) and India (215). The entire rest of the world, these three economies excluded counts 451 investors per 100K of GDP per capita.

The rest of the world is lead by the larger economies - the still relevant financial hub in the UK (77), Japan (42) and Germany (32) while Israel seems relentless to make the top ten in every metric (29). Two large South-South economies have also found their place in the top ten countries by select investors - Brazil (26) and Indonesia (25). Smaller countries with higher GDP per capita are expectedly pushed lower on this list.

Conclusions, Warnings and Fortune Tellings

Unicorns are clearly a bit of an obsession in the startup world. Founders and investors are often obsessed by this arbitrary valuation threshold but a healthy, vibrant ecosystem is so much more that that. Early stage investments, business infrastructure, sound mentorships, and good schools are what makes an innovation ecosystem strong. A combination of strategic top-down and bottom-up initiatives and projects is what you really want. From the above data is evident that some countries are unquestionable superpowers due to their market size and economic strength to the degree that we might foretell a cold war between the two. Yet, it might be a bit of a different, more cooperative war, if that makes sense - like what was advocated for by Kai-fu Lee between the US and China in their quest for AI dominance. Other economic powers are not doing great, some new ones are expectedly rising, some smaller countries might have gotten lucky with a single unicorn or investor. Others have gone all in like Isreal and benefits of it might be reaped for decades to come. The number of unicorns and investors thereof is not the most orthodox measure of economic, tech or innovation power but each country should ponder about its positions on this list.

Curious cases are some of the top twenty global economies that host neither a unicorn nor an investor on their territory: Turkey and Italy are such surprising cases. Two other crucial geopolitical countries have investors but no unicorns: Russia and Saudi Arabia.

Focusing on different parts of the world map more interesting areas pop-up. Scandinavia, arguably one of the regions with the highest standards of life, shows varied results. Sweden has three unicorns and six investors, Denmark has an investor but no unicorns at the moment. Neither Iceland, nor the peculiarly techy Finland, nor the extremely rich Norway have unicorns or investors into them. Turning the globe eastwards, China and South Korea are often topping the charts, but Japan is a curious case. The Land of the Rising Sun has only 4 unicorns, rather meagre considering its economic importance, but it has 16 investors, one of them being the global leader - SoftBank. However, This Japanese investor seems to be more of a creation of its founder Son-san than a result of strategic endeavors of the Japanese public and private sectors that are still tackling the cultural shifts of the new economies. Southeast Asia, a region in the midst of its economic renaissance counting almost 700 million inhabitants is showing most varied results. Indonesia has five unicorns - among which Gojek and Tokopedia, some of the region's most lauded - and three investors. The Philippines have one unicorn and one investor while almost shockingly Malaysia (maybe still recovering from the 1MDB corruption scandal), Vietnam and Thailand have neither unicorns nor investors.

Moreover, sometimes the public markets discover hacks, scams and mismanagements (the Wirecard fraud) and it's only predictable that such cases occur in the private world at higher frequency. For instance, since the publishing of the original list by CB Insights the Softbank backed British fintech unicorn Greensill collapsed, if we don't want to go as far as Theranos.

Volatility and excitement in the world of unicorns are also an understatement. A single investment can push more advanced startups over this magic $1B threshold. Within the last few days, the Croatian electric supercar company Rimac Automobili raised more money from Porsche bringing it within inches of being a unicorn; the Nigerian payments company Flutterwave achieved unicorn status with another round of investment - making Nigeria only the second African country to host a unicorn; Stripe raised $650M and its valuation jumped to $95B which makes it the second largest unicorn globally; and the Swedish startup Klarna raised another round which brought their valuation to $31B. Besides the above, Roblox, the sixth largest unicorn in the world just went public in a whooping $45B IPO. It will be very indicative to see how this data evolves throughout quarters and years to come and a time component will give it an even stronger direction in spotting trends. How will the superpowers evolve, who will be the new countries on the list and who will move up or down, and by how much. Until then, enjoy the magic land of unicorns.