Digital Spring: How ‘Unicorn’ Startups Force Companies To Adapt To The Evolving Digital Landscape

In the investment world, a company is given a valuation to help stakeholders and financiers determine its worth. Much has been made around this concept over the past year, including most notably with on-demand car service Uber, which raised $1.2 billion last week in a funding round that cast a $17 billion valuation on it. And Uber’s not the only one to see such an enormous financial position, as there have been numerous instances within the past year of technology startups seeing their valuations skyrocket to over $1 billion.

This isn’t something normally seen in the industry, and these companies are being labeled “Unicorns”, the fabled mythical creatures of lore. Years ago, people would have thought being valued at over $1 billion was out of the realm of possibility. Well, no longer.

A new report from Orange Silicon Valley (OSV) (disclosure: I work for this company) called “Unicorns, Startups, and Giants: The New Billion Dollar Dynamics of the Digital Landscape,” sets out to explain why businesses, entrepreneurs, investors, and the general public should be concerned about the impact of Unicorns on the community and environment.

Rise of the Startup Unicorns

Talk about these mythical creations first came to mind through an essay Aileen Lee penned on TechCrunch in November 2013. The partner at Kleiner Perkins Caufield & Byers and founder of Cowboy Ventures explored what characteristics made up a billion-dollar company. What’s more, she looked to determine whether there was a way for investors to evaluate whether a startup pitching them would rise to the levels of the likes of YouTube, LinkedIn, and WorkDay.

In “Unicorns, Startups, and Giants,” OSV looked at 60 tech companies that have reached a billion-dollar valuation some time in the past five years. This list was a mixture of public, private, and corporate acquisitions. From this list, it’s been determined that the collective accounts for nearly $232 billion in market value — that’s as of April 2014. But there’s more to this study than just numbers — it’s about the impact and why this billion-dollar trend is happening.

The ‘Digital Spring’ of Startups

A concept created by Georges Nahon, CEO of Orange Silicon Valley, the notion of a “digital spring” is akin to the Arab Spring of 2013 insofar as it’s about change. While the introduction of services like Airbnb, Uber, Pinterest, Marketo, Yelp, Evernote, Box, Square, Tumblr, Kayak, Tableau Software, and Snapchat have entered the mainstream, people are probably looking at their high valuations individually. However, when viewed from a 50,000-foot view, there’s something more drastic happening in the ecosystem.

Decades ago, when you wanted to search for information, you went to a library to find out more about a particular topic. Let’s call these old-school infrastructure Incumbents. This model was disrupted when Google was born. The same thing happened with Microsoft, Amazon, Facebook and what we now term Giants. These companies have enjoyed their time in the spotlight watching technology evolve from Web 1.0 to social media to now span countless other domains. However, as Winston Churchill once said, “Those who fail to learn from history are doomed to repeat it.”

Giants are hoping to stick around for quite some time and we’re now entering a new wave of disruption caused by these Unicorns. In essence, this new #AdaptOrDie phenomenon (as termed by Altimeter Group principal Brian Solis), is more prevalent than ever before. Solis, himself, is interviewed in “Unicorns, Startups, and Giants“, saying (emphasis mine):

If you attempt to compete for the future, if you invest in new technologies to meet the needs of your market, then you will win. But there’s a more prominent part of Digital Transformation that comes from how you and I are changing as a result of technology’s impact on our lives. That’s where a lot of innovation can occur. Innovation has less to do with technology than it has to do with how you think about the opportunities to evolve or to create.

The Giants are looking to survive — thus the reason for the rise of adjacencies. These are defined as opportunities that sit outside of the current focus of the core business. Examples include Google’s $3.2 billion acquisition of Nest, Facebook’s $2 billion purchase of Oculus Rift, or Amazon’s spinning off its internal cloud operations to form Amazon Web Services.

Not About the Money, But Impact on Innovation

Not long after Lee’s post was published on TechCrunch, New Enterprise Associates managing general partner Peter Barris chimed in with his thoughts:

“I believe we are in the early days of one of the most robust periods of innovation I’ve seen in my lifetime, with multiple, concurrent innovation cycles… Not just $1B companies, but $100B companies. Enterprise and consumer technology are the first wave in a transformation that will ultimately impact nearly every aspect of human existence—from education to transportation to healthcare.”

In “Unicorns, Startups, and Giants”, OSV utilizes a taxonomy to lump these billion-dollar companies into six specific categories: big data, cloud, enterprise, e-commerce, mobile, media, and social networking. Based on this arrangement, the report shows that big data ($40.7 billion), enterprise ($46.6 billion), and e-commerce ($48.2 billion) are the top three sectors with the most market value, respectively.

It’s Not About a Startups ‘Bubble’

While the report certainly lists a lot of numbers and valuations, some may wonder if we’re in favor of saying there’s a “bubble” like in the early 2000s. This isn’t the purpose of why OSV did this. It’s more a matter of helping Orange’s ecosystem, partners, and stakeholders understand that while it’s amazing that Uber raised so much, there’s a definite impact on the business status quo. The party is over for those fixated on the old ways. The world needs to evolve — just look at what happened with this week’s taxi cab strike in Europe over Uber. The four-year-old service has created a global phenomenon that has an entire continent seeking to prevent its success!

Of course, there are some things to think about when viewing the numbers: specifically, 70 percent of the 60 companies reviewed in “Unicorns, Startups, and Giants” are focused on transforming the enterprise. This would seem to make sense and adhere to our adjacencies philosophy since for companies to stay in business, they’ll need to understand how to adapt to the seemingly ever-changing landscape.

In addition, some might wonder where all the hype/valuation for these “Unicorns” is coming from. From the 60 companies, most of the money is coming through the public market. However, private investors like venture capitalists and private equity firms are outspending corporate M&A teams by a 2-to-1 margin ($75 billion vs $36 billion).

Now there are some things to contemplate when viewing the report: it’s only US-based companies and the taxonomy may not match your thoughts 100 percent correctly, but we chose to make it more inclusive than exclusive. What’s more, it’s important to understand that this report is not about helping to make a “quick buck,” meaning it’s not to help investors find their next venture.

This nearly 30-page report has more in it, including a look at how the digital landscape will be in 2020 and what areas the new Unicorns will be. The hope is that when you read the report, you’ll be better prepared for the coming movement and be able to quickly adapt within a couple of months or years.

Unicorns, Startups, and Giants: The New Billion Dollar Dynamics of the Digital Landscape from Orange Silicon Valley

Image credits: Orange Silicon Valley, unicorn via Rob Boudon/Flickr, and dollar bills via

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