Saturday, February 15, 2014

Building Startup Unicorns


Aileen Lee posted a timely blog on TechCrunch called “Welcome to the Unicorn Club.”  Unicorns are US based tech companies started since January 2003 and most recently valued at $1 billion by private or public markets.  [the Unicorn image is from her blog post]

She describes 10 learnings from these unicorns.  I list three below:
·       Unicorns comprise “0.07 percent of venture-backed consumer and enterprise software startups”
·       Unicorns have taken an average of 7+ years before a liquidity event. 
·       The founders are generally “well-educated thirtysomethings … who have a history together.”

CB Insights then studied the VCs backing those unicorns and published "The Exceedingly Rare Unicorn VC."  “Startups that exit for over $1 billion are a rarity.  They're so rare that folks have come up with nicknames to describe these rare beasts (unicorns and thunder lizards to name two).  Since building a billion dollar company or unicorn is so hard and so rare, it naturally follows that identifying and investing in them is also pretty difficult.  And the data on VC exits shows that there are, in fact, very few unicorn VCs."  Only 3.5% of active VCs have two unicorns.  Of those, most VCs invested after the Series B round.

Forbes recently wrote about my investing strategy in the “Secrets of an Investor Who Built Two Unicorns.”  The two unicorns are Marketo (where we invested at a $14m valuation) and MobileIron (where we hired the founders).

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