Five Q&As about the unicorn startup and other entrepreneurial species

Reaching unicorn startup status has been a top dream of entrepreneurs in recent years. Now, with forecasts pointing to an economic slowdown by 2023 and faced with an uncertain business environment, other types of companies that are better prepared to withstand a drought could start to gain ground. But what will this race of entrepreneurial animals be like? What are the most stand-out companies, and what trends will mark 2023?

What is a unicorn?

A unicorn refers to a startup company valued at equal to or over $1 billion in financing rounds before going public. The term—first used in 2013—was coined using the mythical animal to represent the rarity of such successful ventures. However, following a few years of a venture capital boom, this type of startup now numbers in the hundreds. Over the course of 2021, 340 companies reached unicorn status, more than in the previous five years combined, passing the threshold of a thousand unicorn companies for the first time.

How many unicorns are there today?

There are currently more than 1,200 unicorns. Some have technically lost their name after being acquired by another company or going public, executing IPOs as successful as Rivian’s, at the end of 2021. This unicorn that produces off-road electric vehicles priced an upsized IPO at $12 billion, one of the largest to date.

How have unicorns evolved in 2022?

After a 2021 of all-time highs, the past year has been punctuated by more moderate trends. The number of startups reaching unicorn status has declined month by month throughout the year, due to a 35% drop in overall venture capital funding in 2022 relative to 2021. At the same time, the emergence of new unicorns has slowed and only 19 startups hit the rank of unicorn in the last quarter of the year, 86% less than in the same period of 2021.

The total value raised by unicorns in 2022 has reached $72.7 billion. This makes it the second-best year on record for this type of company, despite the economic rollercoaster.

Unicorns have also tended to stay in the stable in recent months. Factors like inflation, geopolitical tensions and market volatility may explain the slump in IPOs, with a 76% drop in the number of deals and a 95% drop in the value raised compared to 2021. Other factors affecting these ‘startups’ are the widespread workforce realignments that have happened over the past year in tech companies, as well as the seismic waves caused by the cryptocurrency earthquake.

What unicorns have been launched in Spain and Latin America?

• Spain. Several companies have earned the status of unicorn in 2022, including traveltech company TravelPerk, leisure and entertainment company Fever; Recover, a startup that specialises in recycled cotton; and HRtech Factorial.
• Latin America. The region added nine new unicorns last year from several different countries and sectors, which together raised a total of $2 billion. Some of the Latin American startups that hit this level of valuation are the Mexican logitech Nowports, the Colombian proptech Habi and fintechs Dock and Neon, both Brazilian.

What other entrepreneurial animals are gaining ground in the startup jungle?

Forecasts suggest that investors will prioritise startups with higher profitability and that use capital more efficiently, according to CB Insights. Under this new scenario, these are the other animals of the entrepreneurial wildlife set to grow stronger in 2023:

• Centaur companies. These are unicorns that have also crossed the $100 million in annual recurring revenue threshold. This ensures that their solutions have a large enough customer base and a scalable go-to-market strategy that makes them safer when it comes to an IPO.
• Camel companies. Rather than closing large rounds of financing, this type of startup prioritises balanced growth with the efficient use of small amounts of capital. Their business model helps them navigate through deserts (such as pandemics, times of economic slowdown or recessions) with just the ‘water’ that has already been stored up.
• Cockroach companies. Cockroaches are the only animals that would survive a nuclear catastrophe, which is why the most resilient startup category has earned their name. With slower but steady growth, they need fewer resources and leverage them wisely to ensure profitability.
• Dragon companies. This is the name given to unicorn startups that can pay back the funds raised to their investors in full. A kind of entrepreneurial creature whose long-term sustainability has led some experts to christen 2023 as “the year of the dragon“.

2023, the year for entrepreneurship

Forecasts about what 2023 will hold for entrepreneurs and unicorns abound at this time of year. Some say that the IPO window will stay closed. Others say that industries like biotech and fintech will be some of the hottest tech trends. There are those who have their favourite in the fauna of startups, while others dare to make a guess about which startup will be the next unicorn.

In any event, entrepreneurship and innovation will be crucial when it comes to responding to the challenges that the future of business poses. At BBVA Spark, the best partner for high-growth companies, we want to help the most innovative entrepreneurs on their path to success by providing the best solutions to suit their needs.