The above chart is lifted from a recent GP Bullhound report European Unicorns: Do They Have Legs?. It paints a pretty picture, for the UK and for Europe. In the last twelve months there were 8 new unicorns in the UK and 13 in Europe. That compares with 22 new unicorns in the US over the same period.
The fact that we’re creating larger numbers of big companies gives confidence to investors and provides fertile training grounds for the next generation of entrepreneurs and angels. It’s great to see.
That said, I’m going to finish with a caveat. For the reasons I gave above it’s critical that we create huge companies, but I think the pendulum has swung too far and the unicorn thing is now overdone. There are lots of great companies created which don’t get to $1bn value and at the earliest stages of investment the market opportunity generally isn’t clear enough to make investing in unicorns a viable strategy. The key discipline for every investor should be to ensure that every deal can be a fund returner, and with small funds that doesn’t require $1bn+ valuations. The real skill is putting yourself in a place to get lucky.
For Forward Partners that means investing in companies that can return the fund with exits in the £100-300m range but have a chance of going on to be much bigger. 60% of European unicorns are in the sectors on which we focus: ecommerce, marketplaces and software.