Two Very Good Years For Unicorns

I’ve returned bottles of wine I’ve ordered at restaurants. Two or three times I’ve taken that initial sip and wanted to spit it out. That’s over some four decades.

So it hasn’t happened often.

I’ve never returned a bottle because the waiter brought me a different year from what I ordered.

But that’s what my friend did last weekend.

He ordered an ’07 Napa Cabernet. The waiter brought an ’08.

He didn’t discover the mistake until the bottle was opened and poured.

My friend – who considers himself something of a wine connoisseur – insisted that ’08 was a much worse year than ’07. I was fascinated.

I asked my friend, “Is the wine bad?”

“No,” he said.

“Not bad, well then, perhaps disappointing?” I asked.

“No,” he replied.

“Then what’s the problem?” I asked.

“Two things. I’m paying top vintage price for a poor vintage year. And secondly, the ’07 bottle should taste much better.”

“I see,” I said.

But I didn’t see.

I’ve always thought that years are contributing factors but not an all-encompassing one, especially given recent advances. Nowadays, winemakers can manipulate wine much more.

At best, proclaiming a “good year” is a very rough guideline.

For wines.

But how about for startups?

Is there such a thing as good years and bad years?

The data says yes.

Two Very Good Years

At least when it comes to unicorns, says Aileen Lee, founder of Cowboy Ventures.

Lee was the one who coined the term “unicorns.” It refers to startups with $1 billion or more valuation.

She says there are 84 of them in the U.S. (The Wall Street Journal lists 102 from around the globe, found here.)

The best year: 2007. Twenty-seven percent of Lee’s unicorn group was started that year.

You probably know at least two of them Dropbox and Fitbit (FIT). Dropbox now has a value of around $10 billion. Fitbit: Around $6.5 billion.

Next best year: 2009. Eighteen percent of Lee’s unicorns came from that year.

Uber was the most successful. Its latest valuation: a mind-blowing $51 billion. WhatsApp also dates from that year. It’s now worth a tidy $19 billion.

Was there anything big and earthmoving happening in those years that might explain why they were so prolific?

As it so happens, there was.

The iPhone launched in 2007. And Android got going just months before 2009.

For companies like Square (begun in 2009 and valuated at $6 billion) and InMobi (begun in 2007 and valuated at $2.5 billion), this is no coincidence. Square’s gadgets plug into smartphones and tablets to process credit cards. InMobi makes money by charging 40% of the fee advertisers pay to the mobile Internet site.

Other companies I’ve identified as mobile-related are Stripe, Machine Zone, Tango, Evernote and Lookout.

So when Lee suggests, “The best times to start a unicorn company could be post the launch of a watershed new tech platform,” it doesn’t seem like such a stretch.

These platforms have literally launched millions of apps. More specifically, 1.5 million for Apple and 1.6 million for Android.

I thought it was very possible that companies starting off in either of these years could have picked the low-hanging fruit as their big ideas and/or could have benefited from first-to-market and/or first-to-raise advantage.

But I needed to investigate further. So I looked at every U.S. unicorn born during 2007 to 2010. Exactly 10 are in the mobile space.

That’s a mere 12% of Lee’s total unicorn group.

Mobile-related tech companies made up only 20% of the 2007 and 2009 startups that became unicorns.

Mobile technology had an impact on the number of unicorns generated during those years, but certainly not a major impact.

Mobile 2.0 Will Be Bigger Than Ever

Lee’s theory doesn’t quite hold up.

But I want to be clear here. I’m not saying that mobile tech isn’t important. It most certainly is.

And will continue to be as the mobile space further evolves. It’s making huge strides as it becomes more personalized… leverages big data… and utilizes deep learning tech.

(Deep learning is a rapidly growing branch of artificial intelligence. It doesn’t require domain experts to program knowledge into algorithms. Instead, these techniques can learn by observing data. You can find more on this in this previous article: “Really, This Is Your Future.”)

Mobile tech is arguably a bigger market force now more than ever. Consider that…

• An iPhone 6 has 625 times more transistors than a 1995 Pentium desktop.
• During the iPhone 6 launch weekend, Apple sold about 25 times more CPU transistors than were in all the PCs on Earth in 1995.
• There will be two to three times more smartphones than PCs by 2020.

By the way, these facts come from Benedict Evans’ well-researched report “Mobile Is Eating the World.” It’s definitely worth reading.

Mobile tech continues to be the chosen marketplace for scores of new startups determined to make their mark.

As mobile technology grows increasingly sophisticated, I fully expect it will create even bigger opportunities than before.

And will surely generate a number of future unicorns and near-unicorns.

Lee’s theory may be off the mark. But her underlying assumption that mobile is driving entrepreneurial success is spot on.