Make room for a new generation, sustainable unicorns

Nearly ten years after the term “unicorn” came into use, there are currently about a thousand unicorns. Two more every day. unicorns, young high-growth companies valued by investors at more than $ 1 billion, are long gone. Well-known examples are Uber, Tesla, Airbnb, Dropbox, Groupon, Tumblr, Twitter, Zynga, Space-X and ByteDance. These are companies that have had a huge impact on their market and for consumers. Among the Dutch pride we include Booking, Takeaway (Thuisbezorgd), Adyen, Mollie, Bunq, MessageBird, FlowTraders and Mollie.

Strategy: Upscale quickly and conquer the market

Until now, unicorns were mainly ICT companies developing websites, marketplaces, software and payment services. Digital services and platforms lend themselves to such a promising life: It is relatively easy to start such a business, they can quickly scale up to a global market. And parties that are the first in their market or become the largest (whether through acquisitions or not) can often ultimately benefit from a ‘winner takes all’ market where high revenue and profit margins can be achieved. This makes these companies very interesting for investors looking for fast, great growth. They are willing to take the often sky-high start-up losses in anticipation of sunny returns later. This aggressive form of start-up and growth has increasingly been followed outside America and is seen worldwide as an example of the policy of countries seeking to promote entrepreneurship and growth, including the Dutch Techleap (‘jump’, which refers to the jump in scale) . Every country wants to be high on the rankings.

A new sustainable generation of unicorns

In the new wave of ‘unicorns’, we see many companies trying to accelerate the introduction of sustainable technology to the market, in other words companies with a ‘low CO2 footprint’. Here, Tesla is the great example that has set in motion the development of electric cars. The company has a huge market value, larger than Volkswagen’s and Toyota’s, and that at a fraction of the number of factories and employees.

New unicorns in sustainable technology include: Rivian (USA), which makes a fleet of electric vehicles from trucks to scooters; Northvolt (DK), develops and produces batteries in a sustainable way that is also recyclable; Octopus Energy (UK), a green energy producer investing in solar parks; CSI Solar (Canada) a manufacturer of solar panels; Redwood Materials (US) develops recycling processes and environmentally friendly technologies and materials that enable a circular chain; Indigo (US) helps farmers make money with more sustainable agriculture by making the climate impact measurable and marketable via so-called ‘carbon credits’; American Beyond Meat and Impossible Foods are developing plant-based meat substitutes.

The Dutch competitors of cultured meat Mosa Meat and Meatable are also well on their way to unicorn status. The Vegetarian Butcher was previously recruited by Unilever, something that happens to unicorns all the time. In addition, VanMoof (e-bikes) and Lightyear (solar cars) could achieve that status.

Different dynamics

The new generation of unicorns is a great example of what investors see as promising emerging markets and where existing players are struggling to innovate. Yet a company that is heavily dependent on a technology, a dynamic other than a marketplace or a software company, has a fintech company where the challenge lies primarily in the market and not in the technology. Developing a new technology and later producing it requires large investments and a lot of patience with additional uncertainty: additional obstacles in the development of new technology, unforeseen setbacks, disappointing performance of the technology after the first prototype. It’s all less flexible and programmable than the software and platforms that can get a new update with bug fixes or extra features at night.

Moreover, these advanced technologies can benefit much less or not at all from a win-take-all effect. Now that all car companies are developing electric cars, the question is whether Tesla can maintain its lead in the market. How unique are the patents and how easily can they be counterfeited? And is the company the best manufacturer of cars, or do Mercedes and BMW drive much better, and can Toyota and Volkswagen scale much better with already huge production capacity internally?

Many unicorns are being swallowed up by established parties, only some are still in the stock market. In addition, we see that technology companies like Tesla will license their technology to others. Tesla will in fact become a supplier of knowledge, something we also see in the world of drug development and for example the design of computer chips (the company ARM makes designs, but produces nothing). This makes the technology-based unicorns potentially very profitable.

Sunny future for unicorns?

That there are more and more unicorns in the field of sustainability is good news. Society has an urgent need for new, sustainable technologies that can be quickly scaled up for widespread use. With their willingness to take risks and go after it, unicorns can play an important role in this. With their own technology and as a catalyst for an entire sector, as Tesla did with the automotive industry.

In developing countries, there is concern that the breed of unicorns will lead to a growing emphasis on patents and the protection and sale of technology at a high price, something that agriculture and health care have already had to deal with. The investors (which also include pension funds) are the big profiteers in the world of unicorns.

Perhaps it is good that governments in particular, which are hoping for new fast-growing companies, will continue to focus on keeping new (open source) technologies widely available when investing with their funds. For sustainability means not only new technologies but also a new economy where all parties in the ecosystem have access and can benefit from progress.

This is something the big investors who have sparked the hype about unicorns in the last ten years and were behind the first wave will not immediately notice. With the new wave of sustainable unicorns will also join new investors who are more socially engaged or entrenched and more patient with a return on their investment. Maybe they should have gotten used to the unicorn world’s fast all-or-nothing world. Yet the unicorn is no longer a unique look, but increasingly part of the way innovation and disruption take place. The time with Philips and Unilever’s famous business research laboratories is now far behind us.

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