#2 UNICORNS, CENTAURS AND PONIES: THE NEW BESTIARY OF STARTUPS
Editorial | B2B marketing
January 28, 2023
Written by Capucine de La Bigne, Editorial Content Director at DII
While tech stocks are currently undergoing an unprecedented plunge since the bursting of the internet bubble in the 2000s, the entry of new specimens in the startup arena questions the status of unicorns and old benchmarks. And it’s giving way to new innovative companies that are redefining the notion of success. Drive Innovation Insights, an observatory of business trends since 1993 and creator of professional BtoB clubs, has taken stock of these new developments underway and to come. Here’s how it works.
Unicorns: the end of the reign?
The year 2021 saw the birth of an impressive number of unicorns, which are unlisted startups valued at over $1 billion. In February 2022, more than 1,000 unicorns worldwide were counted (compared to around 200 in 2017) making it a much less closed club than it used to be. This number includes 23 in France, which although far behind the United States, China and the United Kingdom still, is nevertheless showing an encouraging momentum.
If the rush towards these magical animals was, until recently, a sign of good economic health (the start-up nation), these companies often show questionable levels of profitability. And for good reason: their revenues are sometimes low, uncorrelated with valuations that frequently reach record levels (up to 30, 40 or even 50 times their revenues). The recent plunge in technology stocks, after years of euphoria, seems to be reshuffling the deck.
From fantasy to reality
In its “State of the Cloud 2022” report, venture capital fund Bessemer Venture Partners questions unicorn status, which would no longer guarantee sufficient economic strength, and stresses the need to focus on more rational metrics to assess the health of start-ups. This opens the way to other more or less fantastic animals.
The centaurs, for example, whose annual recurring revenue (ARR) exceeds $100 million and who are part of a club that is much more closed than that of the unicorns, and much younger: there are barely 150 of them in the world, of which 60 are believed to have been born by 2021. Among them: Dataiku, a French startup that moved to New York in 2016, but also Deel, Salesoft, Iterable…
The reason the centaur is so popular is that it offers more guarantees in the eyes of investors and is based on a better product-market fit, an effective market access strategy and a growing customer base. Thus, at a time when valuations are being revised downwards and fundraising is becoming rarer, the level of ARR is attracting particular attention. From fantasy to reality?
In this trend, and while Gafas are less attractive, some young innovative companies attach more importance to the impact generated than to their size or to a sometimes-artificial appreciation. They are the “ponies”, this new kind of startup that goes against the current trends and aspires to marry sustainable business model and positive impact, surfing on the structuring societal trends of the last years. You read that right. This new specie, recently created, gathers associated cooperatives to build an alternative economic model by proposing more sustainable everyday goods and services.
Unicorns, decacorns, centaurs, ponies… The bestiary used to categorize the startup universe is enriched with new species, and by the same token inaugurates a return to reality and reason by invoking more concrete measures correlated to current concerns. So, what new animal will soon make its entrance?