Saturday 22 September 2018

Record valuation for unicorn Intercom a rare success story

Ellie Donnelly

Ellie Donnelly

Irish startup company Intercom has become the country's first homegrown 'unicorn', the industry term for those notoriously rare young businesses that pass the $1bn valuation early in their development.

For a startup - loosely defined as a young (ish) company with the potential for rapid and dramatic growth - hitting the coveted $1bn valuation is an important milestone.

Unicorns are rare - not quite as rare as the mythical creatures they're named after, although they've become more common in recent years. The valuation has to have substance. In Intercom's case the company has raised €101m from investors for a 10pc stake in the business. That is a big bet in its own right, and provides the overall valuation just north of €1bn - a record for an Irish startup.

John and Patrick Collison's payments business Stripe is valued even more highly - enough to make the brothers paper billionaires in fact, but despite its Irish founders Stripe was developed in the US.

In 2017, 57 startups crossed the unicorn threshold, ranging from relatively well-known companies, such as Reddit or Quora, to rapid-risers like China's Toutiao (in fact valued at $20bn), which has global scale despite being little known in the West.

Last year ranks third overall in terms of unicorn "births" per year, according to a report by the World Economic Forum (WEF).

The peak was in 2015, when the unusually high availability of venture capital, especially in the US, pushed up valuations.

Silicon Valley is the traditionally home of the unicorn - incubating the likes of Facebook, Airbnb and Twitter before those now giant companies made the transition to the stock markets.

The US is still the main stomping ground for unicorns, notably dwarfing the European Union, a market of roughly similar scale. But China is quickly emerging as a natural home of high potential businesses - thanks to a vast domestic market and the availability of local capital.

News service Toutiao is a striking example.

Toutiao is the behemoth on the 2017 new unicorn list. Based in Beijing, it is a news and information platform that focuses on recommendations using artificial intelligence. The company pushes news articles and other content to users based on their previous interactions as well as a detailed analysis of new content. The platform was only founded in 2012 but has 120 million active users and has also gone on a recent buying spree, acquiring names like Flipagram and Musical.ly.

Crossing the $1bn valuation threshold is not a guarantee of future success, but it puts a business on the radar for more potential investors, including on the stock markets, and there's little doubt that the attention generated can be a catalyst in its own right for accelerated growth or new opportunities.

Stock markets are currently anticipating a string of big tick unicorn flotations.

Short-term home rental service Airbnb is valued at about $30bn, music sharing service Spotify has been valued at as much as $16bn.

Controversial taxi hailing service Uber could be the mother of all unicorns though.

Uber's $68bn makes it the second-highest valued private venture-backed company after China's ride-service company Didi Chuxing.

The likelihood it will list this year is seen as low, but when it does the splash will be enormous.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business