Unicorns are still mythical creatures: the unmaking of a (relatively recent) myth!


Over the last decade we have seen a variety of investors, governments and businesses laud the virtues of unicorns as the key to growth and commercial success.


If you believe this mantra, then the key to national economic success depends on the creation of unicorns, which befitting their name, are endowed with magical powers: countries can judge their relative success by the number of unicorns they can spawn.


So what exactly is a Unicorn?


In the original incarnation, a unicorn was of course defined as a mythical animal typically represented as a horse with a single straight horn projecting from its forehead.


This was then generalised into the notion of something that is highly desirable but difficult to find or obtain.


In the simplest terms a tech unicorn is a company that has been valued by investors at more than one billion dollars but it is important to understand the origins of this definition.


The use of the term in relation to business was first made by venture capitalist Aileen Lee in 2013 and has become part of the lexicon for public and private investors, entrepreneurs and anyone working in the technology industry.


Enter Aileen Lee who in 2013 decided, in quite an arbitrary move, to define a Unicorn as a start-up company valued at more than a billion dollars, typically in the software or technology sector.


Over the last decade, many have argued that this arbitrary number should be increased to allow for inflation – but what is missing is any caveat about how this valuation is arrived at, so that many of these unicorns may have private (ie untested) market valuations of this size even if they have negligible revenues.


While we may argue about the precise thresholds used for this definition, the truly pernicious effects of this mind-set are felt in 3 critical ways:

  1. The assumption that the true metric of success is the number of unicorns in an economy (which enables politicians and leaders to talk enthusiastically about the need for more unicorns!)

  2. The escalation of this attitude which measures national success by the number of these outsize businesses (notwithstanding the negative economic impact of monopolies) and leads to the gutting of themittelstand‘ space with less support for mid-size companies.

  3. The distortion of investment and funding strategies where most of the capital goes to these big guys leaving a desert for the others; regulation favours these outcomes, dwarfing nation states. Some countries are beginning to understand this - the Chinese action on the Ant IPO in 2021 was not a response to the hubris of Jack Ma, but a well-thought through reaction by the strategists in Xi Pings leadership team.

Let’s challenge this over-exuberant desire for more Unicorn!