Nam do australias top ten digital entrepreneurs 2007

Why do investors seem to care about “billion dollar exits”? Historically, top venture funds have driven returns from their ownership in just a few companies in a given fund of many companies. Plus, traditional venture funds have grown in size, requiring larger “exits” to deliver acceptable returns. For example – to return just the initial capital of a $400 million venture fund, that might mean needing to own 20 percent of two different $1 billion companies, or 20 percent of a $2 billion company when the company is acquired or goes public.

So, we wondered, as we’re a year into our new fund [which doesn’t need to back billion-dollar companies to succeed, but hey, we like to learn]: how likely is it for a startup to achieve a billion-dollar valuation? Is there anything we can learn from the mega hits of the past decade, like Facebook, LinkedIn and Workday?

To answer these questions, the Cowboy Ventures team built a dataset of U.S.-based tech companies started since January 2003 and most recently valued at $1 billion by private or public markets. We call it our “Learning Project,” and it’s ongoing.

With big caveats that 1] our data is based on publicly available sources, such as CrunchBase, LinkedIn, and Wikipedia, and 2] it is based on a snapshot in time, which has definite limitations, here is a summary of what we’ve learned, with more explanation following this list*:

Learnings to date about the “Unicorn Club”:

1. We found 39 companies belong to what we call the “Unicorn Club” [by our definition, U.S.-based software companies started since 2003 and valued at over $1 billion by public or private market investors]. That’s about .07 percent of venture-backed consumer and enterprise software startups.
2. On average, four unicorns were born per year in the past decade, with Facebook being the breakout “super-unicorn” [worth >$100 billion]. In each recent decade, 1-3 super unicorns have been born.
3. Consumer-oriented unicorns have been more plentiful and created more value in aggregate, even excluding Facebook.
4. But enterprise-oriented unicorns have become worth more on average, and raised much less private capital, delivering a higher return on private investment.
5. Companies fall somewhat evenly into four major business models: consumer e-commerce, consumer audience, software-as-a-service, and enterprise software.
6. It has taken seven-plus years on average before a “liquidity event” for companies, not including the third of our list that is still private. It’s a long journey beyond vesting periods.
7. Inexperienced, twentysomething founders were an outlier. Companies with well-educated, thirtysomething co-founders who have history together have built the most successes
8. The “big pivot” after starting with a different initial product is an outlier.
9. San Francisco [not the Valley] now reigns as the home of unicorns.
10. There is very little diversity among founders in the Unicorn Club.

Some deeper explanation and additional findings:

1] Welcome to the exclusive, 39-member Unicorn Club: the Top .07%

• Figuring out the denominator to unicorn probability is hard. The NVCA says over 16,000 internet-related companies were funded since 2003; Mattermark says 12,291 in the past 2 years; and the CVR says 10-15,000 software companies are seeded each year. So let’s say 60,000 software and internet companies were funded in the past decade. That would mean .07 percent have become unicorns. Or, 1 in every 1,538.
• Takeaway: it’s really hard, and highly unlikely, to build or invest in a billion dollar company. The tech news may make it seem like there’s a winner being born every minute — but the reality is, the odds are somewhere between catching a foul ball at an MLB game and being struck by lightning in one’s lifetime. Or, more than 100x harder than getting into Stanford.
• That said, these 39 companies have shown it’s possible – and they do offer a lot that can be learned from.

2] Facebook is the super-unicorn of the decade [by our definition, worth >$100B]. Every major technology wave has given birth to one or more super-unicorns

• Facebook is what we call a super-unicorn: it accounts for almost half of the $260 billion aggregate value of the companies on our list. [As such, we excluded them from analysis related to valuations or capital raised]
• Prior decades have also given birth to tech super-unicorns. The 1990s gave birth to Google, currently worth nearly 3x Facebook; and Amazon, worth ~ $160 billion. The 1980’s: Cisco. The 1970s: Apple [currently the most valuable company in the world], Oracle, and Microsoft; and Intel was founded in the 1960s.
• What do super-unicorns have in common? The 1960s marked the era of the semiconductor; the 1970s, the birth of the personal computer; the 1980s, a new networked world; the 1990s, the dawn of the modern Internet; and in the 2000s, new social networks were built.
• Each major wave of technology innovation has given rise to one or more super-unicorns — companies that could change your life to work at or invest in, if you’re not lucky/genius enough to be a co-founder. This leads to more questions. What is the fundamental technology change of the next decade [mobile?]; and will a new super-unicorn or two be born as a result?

Only four unicorns are born per year on average. But not all years have been as fertile:

• The 38 companies on our list outside of Facebook are worth about $3.6 billion on average. This might feel like a letdown after reading about super-unicorns, but remember, startups generally start as ideas that most people think are crazy, dumb, or not that important [remember when people ridiculed Twitter as the place to share that you were eating a ham sandwich?]. Only after many years and extraordinary good fortune, a few grow into unicorns, which is extremely rare and pretty awesome.
• Unicorn founding was not front-end-loaded in the past decade. The best year was 2007 [8 of 36]; the fewest were born in 2003, 2005 and 2008 [as far as we know today; there are none yet founded in 2011 to today]. From this snapshot in time, it’s not clear whether the number of unicorns per year is changing over time.
• It would be interesting to plot the trajectory of unicorns over time — which become more valuable and which fall off the list — and to understand the list of potential unicorns-in-waiting, currently valued at