Once upon a time, “unicorns” were named such because they were pretty rare beasts. Startups with a valuation of over $1 billion are now increasingly common, with a paper from Cornell highlighting the growing number of them in emerging economies, such as Brazil and China.
The report reveals that while the majority of unicorns remain based in the United States, the emerging market is rapidly catching up, with China alone home to around 40% of the unicorns in existence today.
“Since the year 2000, and particularly after the financial crisis (of 2008), companies from emerging markets—particularly China—have become very global,” the authors say.
Latin American growth
The report particularly focuses on startup growth in Latin America, however, with companies like MercadoLibre, Rappi, and Nubank leading the way. Whereas startups in developing countries typically coalesce around high-tech sectors, the situation is different in Latin America.
“Latin America is currently home to an increasing number of unicorns bringing dynamism to the regional entrepreneurial scene. In emerging economies such as Brazil, Argentina, and Colombia, this small group of high-tech high-growth entrepreneurial ventures (valued at over $1 billion dollars) mostly concentrate in relatively lower-tech domains such as e-commerce; direct-to-consumer services; supply chain, logistics and delivery,” the authors explain. “This is in contrast with developed economies, where unicorns dominate innovation-intensive domains, requiring fundamental science breakthroughs such as cybersecurity, artificial intelligence, and analytics.”
The startup scene in Latin America is nonetheless less developed than in other areas. For instance, Sao Paulo is the only ecosystem in the region listed in the top 30 locations in the 2020 Startup Genome report. Despite this, the authors believe investment in entrepreneurship is growing, driven in part by a growing pool of developers.
Much of this investment is concentrated in Brazil, which has captured over half of the market. This is driven in part by a burgeoning middle class that is increasingly desiring innovative products and services.
“Despite the fact that unicorns from emerging markets rely more on their innovative business model design rather than on cutting edge technological innovation, these companies are set to profoundly change the region’s economic and social landscape and accelerate digitalization,” the authors conclude.
