2021 is a unicorn frenzy

2021 has already seen more new $1 billion companies than in any of the previous nine full years
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Dan McCarthy

· 3 min read

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Unicorns are supposed to be rare beasts of fables and folktales, but in the current venture capital landscape, they’re abundant.

Just five months into 2021, there were 199 new companies that reached unicorn status (a private company with a $1+ billion valuation), eclipsing the 163 companies that reached unicorn status in all of 2020, according to Crunchbase data shared with Emerging Tech Brew. And it's not just a pandemic rebound: That figure is higher than any full-year total over the last nine years.

Landscape lowdown

After a 2020 full of stagnation and uncertainty, the VC scene is making up for lost time and then some.

“Many of the concerns...that ground dealmaking to a halt have largely been alleviated in what many investors see as a new normal,” Joshua Chao, venture capital analyst at PitchBook told us. “We’re now seeing VCs invest in companies outside of their immediate networks and it’s just full steam ahead on dealmaking and fundraising.”

Deena Shakir, partner at Lux Capital, said VCs are branching out of their traditional comfort zones to chase opportunities, leading to stiff competition and unprecedented valuations.

  • “Everyone [is] inching further upstream and downstream than their normal sweet spot,” Shakir said. “Hedge funds [are] now leading seed deals and seed funds [are] participating in growth deals.”

Why so exuberant? Blame the same Big Acceleration society underwent since Covid hit: the shift to digital. Tami Hutchinson, VP at Intel Capital, told us the pandemic-fueled digital transformation has now become “a critical must-have for all enterprises,” creating opportunities for startups to serve that need.

Health care, financial services, and privacy and security are the most popular sectors for new $1+ billion companies, per Crunchbase. Shakir echoed that idea, saying Lux is most excited by deals at the intersections of “clinical data and AI, hardware and software, care delivery and clinical insights, [and] physical and digital security.” More proof...

  • In Q1 2021, digital health startups amassed a record $6.7 billion in funding, on pace to eclipse the $14 billion raised in all of 2020.
  • On the fintech side, Webull, the Chinese-owned Robinhood rival, reached unicorn status in February after a $150 million funding round.
  • Israeli cybersecurity firm Wiz is an example of a fresh unicorn in the space—it was valued at $1.7 billion as of May 2021.

Looking ahead...VCs say it’s a safe bet to assume that more billion-dollar companies are on the horizon this year.

“For entrepreneurs, this is possibly one of the most founder-friendly periods we’ve seen in several years—all-time highs for valuations across the board coupled with all-time lows for deals with cumulative dividends and liquidation participation,” Chao said.—JM

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