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Here are a few things that millions of people do every day. Purchase something online using a “buy now, pay later” facility. Make a peer-to-peer money transfer. Connect different financial accounts. Convert currencies using an online bank.
What do these activities have in common? They’re all game-changing innovations developed by FinTechs. But they also share something else. The companies behind them are – or have been – unicorns: privately-held startup companies, valued at US$1 billion or more.
Living in a unicorn world
What’s more, these unicorns are just the tip of a very large iceberg, with their ranks growing almost as fast as the businesses themselves. PwC’s analysis of data from PitchBook Data Inc shows that at the start of 2016, there were 165 unicorns. By March 2022 that number had risen to 1,115, an increase of over 500% in 6 years.
The driver of this headlong growth in the unicorn population? Huge consumer demand for their offerings – together with a vast and expanding flow of capital seeking high-growth investments.
PwC’s analysis of data from PitchBook Data Inc shows that companies specializing in payments raised $16.2bn in funding in 2021. That’s double the amount raised by that sector in all of 2020, and more than triple the total for 2019.
And payments is just one hotspot among many. Looking at VC across all sectors globally, 2021 saw 814 mega rounds (in which US$100 million or more is raised) totaling $251bn in pre-IPO financing.
3 key lessons for unicorns
But zeroing in on the unicorns themselves, how do they achieve, sustain and manage their rapid growth? What shared characteristics set them apart from slower-growing competitors? And what lessons can other startups learn from them – and then apply to accelerate their own ascent to scale? Three areas that jump out for me are:
- Having the right investors – and the right relationship with those investors. In order to scale fast, it’s critical to have a really strong relationship with the venture capitalists, private equity investors or whoever else is providing the funds. The investors also need to be strategically aligned to what the business is doing, where it is today and where it’s aiming to get to. Put simply, there has to be rock-solid belief and trust both ways.
- Ongoing technology innovation. This might sound obvious: it’s a no-brainer that innovation is vital for staying relevant to customers’ needs, which in turn is key to scaling. But looking at startups that haven’t managed to scale, all too often we see a similar pattern of behavior: they’ve tried to cut corners on innovation to save costs, but then found themselves in a predicament where they needed to spend more to fix it. If they’d invested in the first place they’d have been much further ahead.
- A culture of entrepreneurialism and growth. Unicorns invariably have a strongly-aligned and deeply-held vision that’s shared not just across the leadership team, but with all the other stakeholders – investors, collaborative partners, even customers. And this vision is turned into reality through a culture that’s laser-focused on achieving the best outcomes for customers and scaling the business.
Take those three ingredients, turbo-charge them with a great disruptive idea, and you’ve got the engine that will drive your start-up to scale. How to develop and maximize all three of these attributes? In forthcoming blogs my colleagues and I around the world will be taking a closer look at each in turn. Stay tuned.
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Tax, National Private Company Services Leader and National Capital Region Leader, PwC Canada
Tel: 1 6138982113
