After all, where have all the unicorns gone?

The classification of a company as a unicorn has been widely questioned

The fantasy creature representing the company with a market value of $1 billion continues to make a very rare appearance. According to the latest international reports, there are just over 1,200 unicorns worldwide, of which only 45 come from Latin America and only seven from the African continent.

The birth of unicorns has declined significantly since peaking in 2021, in the face of economic crisis and high inflation around the world. Investments were directed towards safer and more consolidated markets. Investments in startups are considered among the riskiest, due to market uncertainties, consumer behavior and because they are structures that must validate the product with successes and errors, very sensitive to fluctuations in the economy.

With this financial instability, startups have seen less investment money and funds have been more careful in their valuation calculations. Therefore, the market value dropped dramatically. Some companies have even lost their unicorn status after bear rounds.

Given that the parameter used to classify this type of startup is the value in dollars, it is natural that the United States leads the ranking, especially since that is where the currency comes from. Furthermore, the country is considered the safest for investments.

The base is calculated this way because it is not only the official currency of the United States, which is the largest economy in the world, but also for the international monetary reference. It is used by the vast majority of governments as the basis for their foreign reserves and commodity trading.

Unicorns questioned

Despite still representing the biggest support in the market, with the confirmation of the success of the startup’s journey, the company’s classification as a unicorn has been called into question. Famous international funds invested hundreds of millions of dollars in companies that seemed to be the big bet of the moment, but whose valuations were significantly inflated. In other words, they weren’t worth everything they imagined, and the challenge was even greater than it seemed.

At the same time, everything indicates that the sector has learned from the ups and downs of startups, and the number of angel investors making smaller contributions has increased significantly. This increase brings investors closer to market reality, as the funds have forced startups to adjust their valuations and open more realistic rounds, as well as putting pressure on companies to be more cautious in their spending.

With the scarcity of investments and the greater difficulty in completing a round, money needs to last longer. This scenario contributed to the fact that in 2023 only one startup would earn the name unicorn in Latin America: Brazilian fintech Pismo, bought by Visa for $1 billion. But already a hundred startups appear on the list of possible unicorns in the next two years.

Brazil’s position as the ninth largest economy in the world is very strategic for companies looking to scale up their solution. There are 203 million inhabitants ready to consume a good product. It is not surprising that European and American startups seek to consolidate in the country as a strategy for internationalization and growth.

New businesses will be created that will be able to exploit the improvement in the global economic scenario, with the drop in interest rates announced by the main world banks, associated with greater purchasing power of the population and a reduction, albeit modest, in inflation. capable of increasing sales and bringing more meaningful results for investors. Startups that demonstrate an increase in recurring revenue will receive valuable contributions in the coming years.

Finally, it can be emphasized that unicorns have not disappeared from the map, they are just waiting for the right moment in the economy to multiply again around the world. There is therefore a strong expectation of growth in Latin America, led by Brazil, Colombia and Mexico, which already have the largest number of billion-dollar startups.

Rafael Kenji Hamada is a doctor, CEO of FHE Ventures and Health Angels Venture Builder, investment funds in the venture builder format.

Source: Terra

Rose

Rose James is a Gossipify movie and series reviewer known for her in-depth analysis and unique perspective on the latest releases. With a background in film studies, she provides engaging and informative reviews, and keeps readers up to date with industry trends and emerging talents.