Venture without Borders: The Global Spread of Billion Dollar Start-ups

In the venture capital industry, a tech company achieving "unicorn" status – valued over $1BN – is a remarkable achievement that signifies high growth, innovation, and often, a disruptive business model. Unicorn status was much “easier” to achieve when capital was abundant to help boost valuations, especially during 2019-2022. With global macroeconomic shifts, the unicorn status has been harder to achieve as investors shift their focus on unit economics, profitability, and growth. As of Jan. 31/ 2024, 89 out of 1,754 companies have fallen from their unicorn status or are no longer in business. 

Traditionally, the quest to spot these mythical companies was predominantly centred around Silicon Valley, the epicentre of technology and innovation. However, the venture capital landscape is changing. Today, unicorn companies are not just an American phenomenon; they are a global one, sprouting up in regions far and wide, from Southeast Asia to Latin America, from Europe to Africa. 

Examples include Canva in Australia, Bolt in Estonia, Kako Technologies in Korea, Sorare in France, Revolut in UK, QuintoAndar in Brazil, Rappi in Mexico, 1password in Canada, SHEIN in Singapore, & OYO Rooms in India

The limitation of traditional deal sourcing is that opportunities are found predominately by a network of individuals, which can be quite a manual process. Hence why the industry has historically been very human capital-centric and software-light. But now with the ability to aggregate a wide array of alternative data sources, layering the data, and using AI to enrich this information, has given fuel to helping investors see a wider market of opportunities. This post delves into why unicorn companies can now be created around the world and how incorporating a data-driven strategy to venture can further support the ambitions of finding these companies. 

The Rise of Global Unicorns

There’s no doubt that the United States continues to be the powerhouse of the highest number of unicorns. However, the global distribution of unicorn companies being created is broadening with countries like China, the UK, India, Germany, and Israel also creating their own unicorn factories, showcasing significant growth year over year. As of Jan. 31, 2024, there were over 1,665 active or exited unicorns worldwide, which has been growing steadily. This diversification of unicorns being created across the globe highlights the democratization of technology, talent, and capital.

3 reasons for the global dispersion of unicorns. 

Firstly, digital transformation has levelled the playing field, allowing startups from anywhere to access global markets. The adoption of cloud computing, mobile technologies, and e-commerce platforms has enabled businesses to scale rapidly without the geographical constraints that once limited them. With advanced technologies such as AI, there will be a new emergence of powerful technology capable of creating software that never existed before. This new category of technology can certainly be a new era of AI-driven creativity and productivity, contributing to the creation of new unicorn companies. 

Secondly, the globalization of talent facilitated through remote work has allowed brilliant minds to contribute to the startup ecosystem, regardless of their location. The global COVID pandemic expedited the transition of the world being able to operate completely digitally enabling the workforce to be just as productive. Alumni's from unicorns are also utilizing their own experiences and expertise to venture in entrepreneurship to create their own companies fueled by their own goals and ambitions.   

Finally, there's been an increase in access to venture capital (VC) outside traditional US tech hubs. Global VC deal value hit record highs of US$745Bn in 2021 and winding back down to historical normals US$346Bn in 2023, with approximately 50% of the venture funding going to the rest of the world. Furthermore, the success stories from these regions have prompted more investors to look beyond their domestic markets. Saudi Arabia announced $40BN to invest in AI technology and potentially become the largest player in the hot market - that’s a whole lot of capital that needs to go to work. 

Private investors aren’t the only ones that have taken notice, governments around the world have recognized the value of nurturing their startup ecosystems as a pathway to economic growth and innovation. Many have implemented policies and programs to support startups and attract venture capital. For example, the UK's government has been instrumental in creating a conducive environment for startups through grants, incubator programs, and tax incentives. 

The Data-Driven Approach to Venture Capital

With the rise of global unicorns being created, VCs are leveraging big data analytics, artificial intelligence, and machine learning to scout for potential opportunities. The ability to process large amounts of datasets has enabled investors to identify high-growth potential startups at an early stage, evaluate founder’s backgrounds, analyze market trends, and benchmark startup performance like never before. Moreover, it aids in diversifying investments across sectors and geographies for a broader reach of companies. As the competition for identifying and investing in potential unicorns intensifies, a stronger focus on the ability to win will become a major competitive advantage. 

Emerging technologies such as robotics, artificial intelligence, quantum computing, and biotechnology are likely to fuel the next wave of innovation, creating new opportunities for startups worldwide. The era of unicorn companies being a rarity confined to a few tech hubs is over. Today, thanks to digital transformation, recycling of talent, increased access to venture capital, and supportive government policies, the barrier to pursuing entrepreneurship and value creation around the world is being reduced. The adoption of data-driven investment strategies from VCs will help identify these opportunities around the world at the earliest inception and be evaluated based on the company’s merits. This global spread of unicorns not only diversifies the venture capital landscape but also democratizes the opportunities for innovation and economic growth. As we look to the future, it's clear that the potential for startup success is no longer bound by geography but by the boundless ambition and innovation of entrepreneurs worldwide.

If you want to learn more about data driven approach to venture, book a demo of our product Compass.