What are unicorn companies and why could they be vital for Latin America?

The future of global markets could be influenced by these types of companies.

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We tell you the importance of the 'unicorn companies'. / Photo: Pexels

LatinAmerican Post | Ariel Cipolla

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Leer en español: ¿Qué son las empresas unicornio y por qué podrían ser vitales para América Latina?

The world of markets is volatile, but it allows new opportunities to constantly emerge. For example, a new breed of companies, called unicorns, began to shine on Wall Street. An example is Airbnb, which debuted with a value of $ 47.3 billion in December 2020, or DoorDash, with $ 68.4 billion.

We are talking about companies that, generally, are dedicated to the area of technology and that were greatly benefited by the pandemic since much of the production did not need to be paralyzed due to contagions. Precisely, the idea of "unicorn" refers to the fabulous and the mythological, that is, an animal that we all hope to find.

The truth is that, unlike this animal that exists only in literature, unicorn companies are absolutely real. Even Latin America has some really interesting examples that explain why the future employment of the region could pass through this area. Let's see, then, the importance of unicorn companies.

The value of unicorn companies

In the field of business, it is increasingly common to hear this term. These startups are often the best places to work. As a first characteristic, an excellent work environment is usually guaranteed, where employees have enormous labor freedoms. For example, Mercado Libre, one of the paradigmatic examples from Latin America, appeared in the Great Place to Work ranking of the 10 best multinationals to work for on the planet.

This is due, first of all, to the fact that it is a young environment, but also with freedoms. At this particular time due to the coronavirus, many of the workers of these companies, including Mercado Libre, guaranteed employment from home, which allowed those companies that could not adapt to take advantage of. Its value is so important that it is even equivalent to more than double the reserves of the territory and 20% of the Argentine national GDP.

Of course, this is not the only feature that differentiates them. The key is in the power of sustained growth, something that not all companies achieve. On the contrary, only 10% of startups reach 3 years of life. However, those that manage to differentiate themselves by occupying large untapped niches, usually generate the confidence of investors, being able to transform themselves into unicorn companies.

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At the same time, another key aspect is that the valuation of a unicorn company must be around 1 billion dollars without having been acquired by another one, according to Aileen Lee, founder of Cowboy Ventures, the first to bring the term of a unicorn company. This is due to its accelerated growth in financial terms, something that is usually associated with being a disruptive company. Hence, almost all companies of this style belong to the field of technology.

The truth is that little by little, these startups are beginning to displace traditional companies. In the case of Latin America, we see that there is a process to develop a club of its own for unicorns, something that could be essential to achieve economic progress in the region. Although it will not be easy, there are some examples that promise a great future.

We have already named Mercado Libre, but the truth is that there is also another firm that has become popular recently: Rappi. Of Colombian origin, it was released in 2015 and since then it has not stopped growing. This first Colombian unicorn is committed to conquering all of Latin America, having a constant growth of 20% per month, a huge impact on quarantine, and a market value that exceeds 3,000 million dollars.

The banking field is also exploited in Latin America, with the Brazilian Nubank as its main exponent. Emerged in 2013, it is sweeping Latin America by acquiring 41,000 new customers a day. The current market value is stipulated at about 8,800 million euros, standing out for offering an incredible user experience, betting on continuous improvements.

For this reason, as highlighted in a report by the Latin American Council of Schools of Administration (CLADE), we are going through a “generation of Latin American unicorns”. These are companies that change the rules of the game, affecting markets, but also offering interesting options to consumers. The emergence of new proposals and the consolidation of current ones will depend on Latin American private progress.

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