Reasons behind the rapid growth of unicorns Unicorn (finance)

1 reasons behind rapid growth of unicorns

1.1 big fast
1.2 company buyouts
1.3 staying private
1.4 technological advancements

reasons behind rapid growth of unicorns
get big fast

investors , venture capital firms adopting big fast (gbf) strategy startups. gbf strategy startup tries expand @ high rate through large funding rounds , price cutting gain advantage on market share , push away rival competitors fast possible. rapid exponential returns through strategy seems attractive parties involved. however, there cautionary note of dot-com bubble of 2000 , lack of long-term sustainability in value creation of companies born internet age.

company buyouts

many unicorns created through buyouts large public companies. in low interest rate , slow-growth environment, many companies apple, facebook, , google focus on acquisitions instead of focusing on capital expenditures , development of internal investment projects. large companies rather bolster businesses through buying out established technology , business models rather creating themselves.

staying private

the average age of technology company before goes public 11 years, opposed average life of 4 years in 1999. new dynamic stems increased amount of private capital available unicorns , passing of jumpstart our business startups (jobs) act in 2012, increased amount of shareholders company can have multiple of 4 before company had disclose financials publicly. amount of private capital invested in software companies has increased three-fold 2013 2015.

through these funding rounds, companies not need go through initial public offering ipo obtain capital or higher valuation. can go investors more capital. ipos run risk of devaluation of company if public market thinks company worth less investors. couple recent examples of square, best known mobile payments , financial services business, , trivago, popular german hotel search engine, both of priced below initial offer prices market. because of severe over-valuation of both companies in private market investors , venture capital firms. market did not agree both companies valuations, , therefore, dropped price of each stock initial ipo range.

investors , startups not want deal hassle of going public because of increased regulations. regulations sarbanes-oxley act have given stringent of regulations many of these companies want avoid staying private.

technological advancements

startups taking advantage of flood of new technology of last decade obtain unicorn status. explosion of social media , access millions utilizing technology gain massive economies of scale, startups have ability expand business faster ever. new innovations in technology including mobile smartphones, p2p platforms, , cloud computing combination of social media applications has aided in growth of unicorns.