Tribune. When analyst Aileen Lee coined the term “unicorn” in 2013, she found start-ups worth at least a billion dollars were so rare (thirty-nine at the time) that they deserved. the name of a legendary creature.
Now the word has entered common parlance, has spread to the whole world and, at the end of March 2021, 630 unicorns are listed by the CB Insights database, sixteen times more than initially: is the animal still mythical? Always in search of rarity, the terms “decacorn” (valuation higher than 10 billion dollars, or about 8.5 billion euros), and even the extravagant “hectocorn” (more than 100 billion dollars) have since flourished. .
These valuations remain criticized, Bloomberg summarizing after study: “Here is the secret of the calculation: the numbers are somehow made up. “ The interest that a start-up has in becoming a unicorn, despite an arbitrary definition, pushes it to embellish its accounts, and this is confirmed empirically.
“Psychological threshold”
First, let’s get back to the definition: why a billion? Aileen Lee explains that venture capital firms must bet on highly profitable companies for their return on investment, without however justifying the figure. Stewart Butterfield, CEO of Slack, confides instead: “Yes, it’s arbitrary because it’s a big round number (…). It is a psychological threshold for customers, employees and the press. “
He even mentions that he would have abandoned his start-up if this threshold had not been crossed. Adding a zero makes everyone happy by expanding the number because we are counting in base 10. If, like the Babylonians, we used a sexagesimal system (in base 60), the bar would be 605 = 777,600,000.
As for the unit, the dollar has imposed itself because the original study concerns American companies. The dollar is also the most traded currency in the world, almost three times more than the second, the euro. Nonetheless, two of the top four unicorns are Chinese and the first is ByteDance, valued at $ 140 billion. While there are still more American unicorns in 2021, the [journal indien] Financial Express suggests that China may soon go ahead. So, why not the yuan?
Although the criteria for entry into the Unicorn Club is arbitrary, being part of it has advantages for a start-up wishing to grow quickly. Take France: with each new discovery, the press publishes together to evoke it and brings a strong exposure to the company, its directors and its shareholders. A 2017 study demonstrates the notable increase in media attention thanks to the “unicorn” label, followed by the attraction of new investors.
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