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The number of private companies worth $1 billion or more stands at an all-time high, and the largest have outgrown their description as “unicorns.”
It’s no longer unusual to see private companies valued at $10 billion or more, way bigger than those that first earned the unicorn name.
Some recent examples include business credit specialist Brex Inc., valued at $12.6 billion, the $22 billion valuation for institutional market maker Citadel Securities, and the whopping $40 billion private market valuation for digital payments processor Checkout Ltd.
Then there’s TikTok parent ByteDance, valued at $140 billion; Elon Musk’s SpaceX, valued at $100 billion; payments company Stripe, valued at $95 billion; and $42 billion for “Fortnite” owner Epic Games.
All told, CB Insights reported 659 private companies valued at $1 billion or more as of Dec. 31, a 69% increase in the past year and an all-time high.
The term unicorn is typically credited to Aileen Lee, a former Kleiner Perkins Caufield & Byers investor, who founded seed stage venture firm Cowboy Ventures in 2012.
In 2013, Lee coined wrote an article, “Welcome to the unicorn club: learning from billion dollar startups.”
The term caught on.
Lee did not reply to an inquiry from MarketWatch on any update on the unicorn name for larger private companies.
CB Insights has seen the term “decacorns” being used to describe companies valued at more than $10 billion, and “hectocorn” has been used for those valued at over $100 billion. Neither moniker has captured a huge following. Nor has the term “dragon,” as proposed by others.
Curtis Mo, a partner at DLA Piper who works on securities law in Silicon Valley, said none of these names seems to have the ring or evident meaning as unicorn.
“I typically hear folks refer to greater than $10 billion unicorns as ‘unicorns,’ ‘decacorns’ or ‘dragons’,” Mo said. “I have also heard folks refer to ‘super unicorns’, sometimes greater than $100 billion or sometimes [larger than] some other big threshold.”
Marcus Bolsinger, partner at Dechert and co-head of the firm’s private equity practice, polled his family members to see which term generated the most buzz and came up with the terms “Alicorn” (Unicorn with wings) or “Pegasus.”
No matter what name sticks, Bolsinger said private companies are able to raise billions in funding through private stock sales and other equity deals without having to go public. He sees a pipeline for more of these mega private companies in 2022 given the challenging IPO environment.
Some private companies are so big they don’t even need to raise money in an IPO, and instead opt to go public through a direct listing.
Coinbase Global Inc.
COIN,
the cryptocurrency company, fetched an $86 billion market cap when it went public in early 2021 through a direct listing. For comparison, that’s bigger than many of the companies in the S&P 500.
F-Prime Capital, the venture firm backed by members of Fidelity Investment parent company FMR LLC, sees fintech companies as a rising sector for mega unicorns.
In 2014, fintech companies accounted for about 10%, or $10 billion, of the total private funding universe for startups. In 2021, the sector drew $119 billion of investment for a 34% share of the market, according to a recent study by the firm.
The firm also compiled a Fintech index of 54 publicly traded companies in the sector with a combined market cap of more than $690 billion as of Monday. Some components include Coinbase, Flywire Corp
FLYW,
and Hippo Holdings
HIPO,
Some larger private companies that could be contenders for the index include Stripe, Klarna, Plaid and Checkout, the study said.
“We think 2022 is going to be a very strong year and that fintech still has a lot of legs,” said David Jegen, managing partner of the F-Prime Capital Tech Fund.
Although public markets have corrected in 2022 and fintech stocks have lost roughly 40% of their value, those moves haven’t trickled down to early stage investing, which is a focus of F-Prime Capital.
“We continue to see new companies in payments, crypto, and banking and we’ll be quite active,” Jegen said.
Facebook marked an early super-sized unicorn
One of the first high profile examples of this large private company type was Facebook, now renamed Meta Platform Inc.
FB,
Facebook had grown to a roughly $16 billion valuation by 2010 and went public in 2012 with a market cap of more than $100 billion.
Accel Partners, which invested $98 million in Facebook in 2005, ended up selling about $2.2 billion of stock in the Facebook IPO and owning another 143.65 million shares after it went public.
For now, the term unicorn continues to get plenty of use, including a red origami unicorn depicted on the recently published book, “The Power Law…Venture Capital and the Making of the New Future” by Sebastian Mallaby.
Asked what term he leans toward, Mallaby replied, “Decacorn?”
