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Home Commentary Click Send

Do Unicorns Stimulate Competition Or What?

by Rarzack Olaegbe
3 years ago
in Click Send
Reading Time: 2 mins read
Unicorns-and-Branding
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Welcome to the unicorn club. That was the title of the 2013 article written by Aileen Lee in TechCrunch. Lee, an American venture capitalist, is also the founder of Cowboy Ventures. Eight years after that coinage, the unicorn is used to describe a financial behemoth.

The article, Welcome to the Unicorn Club: Learning from Billion-dollar Start-ups, described unicorns as privately held companies with a billion-dollar valuation. She called such companies unicorns because they were rare. Only a few existed when she coined the term.

In June 2021, research shows there are over 600 unicorns in the world. They have raised $442 billion in total. They are valued at around $2 trillion. These unicorns are so relatively uncommon. They have seen increasing success. They have gained market momentum. They are boosting the market. As such, they have a mythical classification due to their rareness.

A venture capitalist told me that investors and venture capitalists generally determine the value of unicorns. She said all the valuations hinge on whether the investors believe the companies will grow and develop over time.

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“Take it from me. It is all longer-term forecasting,” she said. The valuations have nothing to do with their financial performance. Many of these businesses rarely made any money when they first started. Oga, if the start-ups-turned-unicorns do not make money, why are they unicorns? Are you asking me? Yes. I would reach out to Lee. Whatever Lee’s answers are, you would get them. Thank you. I would be waiting.

My venture capitalist friend said the investors do face some difficulties in their forecast. If there were no competitors in the industry, there would be no other business model to compare. That would make the process complicated. So far, out of the seven unicorns in Africa, Nigeria has six.

Here is a list: Andela, Flutterwave, Interswitch, Chipper Cash, Jumia and Opay. The unicorns are stimulating competition. For instance, in the fintech ecosystem Interswitch, Flutterwave, Paystack, TeamApt and Opay are competing. Take Flutterwave. Born in 2016, it facilitates international payments for African and international companies such as Facebook and Uber.

It has touchpoints in five countries. Take Interswitch. Born in 2002 when no one was interested in Africa, it did not get outside funding until recently. It processes 22 million debit and credit cards through its Verve offering. About 190,000 businesses use its platform to process transactions. It has footholds in three countries.

From the sideliner

The legacy fintech firms are looking over their shoulders.

Are they afraid?

No, they are watchful. Alert.

They are aware that these unicorns have access to outside funding and can spring surprises. Ok, does that mean the unicorns cannot become dinosaurs?

It depends.

On what?

I would not know. Maybe we could hold a Zoom meeting with Lee.

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