Unicorn companies got their name as it was considered rare for a start-up in private hands to reach a valuation of more than $1bn. That may have been the case a few years ago but, today, there are more than 100 'unicorn' companies, which for many suggests that we could be living through another tech bubble.
New research from M&A advisory firm Magister Advisors points to the existence of what it calls a sub-set of those 100 companies whose valuations are now reaching 'mythical' levels.
Described as the 'Icarus' sub-set, these companies are vulnerable because, without a platform or a sustainable USP, they are at huge risk of devolving into 'features' within other platforms of products and many could end up simply being incorporated into new releases from their competitors.
The risk of this happening is growing. Many are neither a 'global' platform company, or even a high value business.
Commenting, Victor Basta, Magister's managing partner, said: "Microsoft's market value at IPO was $500million, Cisco's was $300m. Today an eye-watering 100 plus private companies are valued at more than $1bn. A number of these businesses are at serious long-term risk of being embedded out of independent existence. Their current valuations are essentially skyhooks and therefore unsustainable."
So are we living in a bubble?
There's certainly a worry that a growing number of entrepreneurs under the age of 30 have no memory of the last big crash in 2000; the valuation of companies such as Uber at $40bn is fundamentally at odds with their revenues and profits and many companies are burning cash at an alarming rate, not to mention that we could be entering a period of rising interest rates.
If it looks like a bubble and sounds like a bubble, it probably is a bubble!
