A few weeks ago, Revolut was the latest startup to join the exclusive club of companies which can refer to themselves as British unicorns. This term has become a popular buzzword in the startup sphere, denoting a young company which successfully reaches a $1bn valuation. The term was first coined in 2013 by Aileen Lee, the founder of VC house Cowboy Ventures, who compared the rarity of such startups to near myths.
However, as the rise of Revolut suggests, unicorn startups are becoming a more common sight. This is especially the case in the US and China, but also in the UK. (Incidentally, after the continent economies of the US and China, London’s tech scene is punching well above its weight in this regard).
What other British startups can be considered unicorns? Several other conditions need to be met, as well as the initial valuation. Firstly, the company has to be privately held – this simply reflects the fact that if a company has floated on a public market, it is likely by nature very successful and has probably been valued over $1b for quite some time.
In general a unicorn should also be independent. This is more debatable, but a subsidiary which is set up by Google clearly has an easier route to a billion-dollar valuation than, say, a company founded by university students. In our eyes, this definition also means that a company which has been acquired is no longer a unicorn.
This follows into the much more vague question of what makes a startup a startup, and when an established startup just becomes a normal company. Does age play a factor? Skyscanner was founded in 2001, and reached unicorn status 15 years later with a $125m funding round. Others, such as Deliveroo, reached unicorn status after five years. Startups are hard to define, but for the purposes of this analysis, we have excluded companies that were founded in the 90s. This seems like a fair cut-off point.
Including Deliveroo, seven British startups which incorporated this decade have already reached $1b valuations:
A further four unicorns were incorporated in the decade before 2010:
Skyscanner, which as we mentioned before also started up in the 000s, reached unicorn status in 2016. Later that year they were acquired by Ctrip, a Chinese travel company, for $1.7bn. Under our definition, that means it’s no longer a unicorn proper.
In terms of the next start British startup to reach unicorn status, rumours are already circulating that Cambridge’s cybersecurity company Darktrace recently received a $1bn+ valuation in a secondary buyout between two VCs. Revolut’s main challenger bank competitors Monzo and Atom also look like they are well on their way to a £1b valuation, having raised £106m and £432m respectively. Starling, whilst smaller than the other challenger banks, is also a good bet, having recently raised £10m in an unannounced fundraising.
Finally, it’s worth mentioning that the valuations for these British unicorns has been decided by a small group of private investors, who have a lot to gain by plugging their portfolio. The Dot.com bubble was caused by the overvaluing of young tech companies – various commentators think something similar could be happening with the notion of unicorns. Indeed, we highlighted the issues surrounding BrewDog’s billion-dollar valuation last year. These companies will have to deliver on their potential by the time they reach the public markets.