2015 In Review: The Year Of The Unicorn by Kyle Stanford, PitchBook
Down the road, 2015 may well be remembered as the Year of the Unicorn.
More companies achieved the coveted $1 billion+ valuation in 2015 than any year before, with a new unicorn popping up at a rate of nearly 1.5 per week. It could be a few years until startups hit the milestone at the same or higher rate, as it’s expected that exorbitant venture spending is about to hit last call (or already has). The term “unicorn” was coined in 2013, when joining the club was quite rare—like their namesake suggests; these days, a more prestigious milestone might be companies valued at $10 billion+, with Uber, admittedly a unique beast in the startup landscape, reportedly in the process of raising a multibillion-dollar round at a valuation of over $60 billion.
Prescience Partners returned 6.75% for the second quarter, underperforming the S&P 500's 8.55% return but coming out ahead of the Barclay Equity Long/ Short Index's 2.62% return. However, for the first six months of the year, Prescience is up 30.66%, doubling the S&P's 15.25% return and smashing the Barclay Equity Long/ Short Index's 9.27% return. Read More
2015 saw 47 companies become new unicorns within the U.S., a 38% increase over 2014, which previously stood as the high-water mark. That increase was outdone by companies based outside the U.S., as this year doubled the count of 2014 (see above).
Throughout the year, criticism arose over the relative ease at which companies were raising rounds at billion-dollar valuations, with many claiming it as an indication of being in a bubble. That fear of a private valuation bubble, along with scarce exit options, may have led investors to turn a more wary eye on companies looking to raise rounds at such lofty valuations.
All totaled, nearly $33 billion was invested in unicorns this year, with the median deal size of $158 million. Six deals of at least $1 billion were raised by unicorns, including a couple by Uber alone. All that capital didn’t just come from traditional VCs either. Mutual funds especially jumped at the chance to add these companies to their portfolios, and in turn helped lead the way for mega-round after mega-round for both new and old unicorns. Fidelity, Wellington Management and T. Rowe Price showed up in deals raised by 23 unicorns in 2015 combined, including those for Airbnb, Snapchat and Pinterest (each of which is valued at $11 billion or more).
In November, Fidelity caused a stir when it marked down several of its tech investments, including unicorns Snapchat and Zenefits. Whether or not this was an actual hit on the companies and their high valuations, or simply an accounting move, the public nature of the markdowns brought up the notion that private companies may not be as willing to take on mutual fund money in the future. If that’s the case, raising those unicorn rounds could be much more difficult.
Here is a list of investors with the most current unicorns in their portfolios, as well as several of each firm’s notable investments:
So will valuations continue to grow? Or will they come back to earth? 2016 should be a telling year. The popular quip with unicorns has always been that the only important valuation is what comes with an exit, as reminded by former unicorn Gilt Groupe reportedly close to being acquired for just $250 million.