CapitalPitch Blog

Episode 10 Part 2 - To be a Unicorn Startup, you need to think globally.

[fa icon="calendar"] 05/06/2018 8:00:00 AM / by Lucy Courtenay

Lucy Courtenay

Lead Investor Podcast - e10p2 

We have seen very successful unicorn startups come out of the United States, Israel, China and Southeast Asia. Unfortunately, the rest of the world is still trying to figure out how to identify, invest in and build these companies at scale.

Take Israel for example, they only have 7.5 million people, but they have a culture of deep technology innovation that is competitive globally in areas of security and wireless. The Israeli’ model (or secret sauce) has been to focus on deep technology innovation and list 280 businesses on the Nasdaq. They have built a reputation of being one of the most advanced in this area over recent years. 

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In other countries around the world, we are seeing a lack of innovation culture. Countries need to ask themselves, “what is our value proposition”? “What do we have to offer the technology industry”? Governments and countries need to focus and hone in on their technology offering. Once they have determined this, governments should provide support, education, funding and resources to ensure success.

 

When look at 3 of the most successful business out of the United States, being Apple, Google and Intel, at least one third of their revenue is derived from outside of the United States. Take a look at the Silicon Valley Top 150 Businesses for 2017. This list comes out every year and from this list, over 50% of revenue and sales generated by these businesses comes from international sources, not the domestic US market.

 

When building a business, entrepreneurs and co-founders from small domestic markets should be aware that in the long-term only 10% of their revenue would be generated from their local market and the rest will come from international markets. If there is no international revenue, then the business is unlikely to become a unicorn.

 

For example, a telecom chip company, might start out winning design competitions in the USA and growing in the US market. However, to expand their product they should also be entering international design competitions, to extend their reach. Software businesses from Silicon Valley have a domestic presence, but they also have international revenue streams.

 

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Raising capital is a very important aspect of growing any business. The majority of businesses on the top 150 companies in Silicon Valley list have raised capital at some stage in their growth. We could estimate that the there was $60 to $75 million in private capital being raised, over multiple rounds, before any of these companies made the list. Subsequently, when these business went to IPO, they often raised similar amounts or significantly more in the public markets.

 

Global expansion was always a part of the plan, but it had to be the right timing.

 

One of the benefits of raising capital is that it allows the business to expand into international territories.

 

Venture capital has a huge impact and importance on the USA economy.

 

Venture capital activity in the United States reached its highest level since the turn of the millennium in 2017. According to the PitchBook-NVCA Venture Monitor, VC firms invested a total of $84.2 billion last year, up 16% from 2016 and more than 100 percent from ten years ago.

 

Australia’s Venture Capital sector is improving but remains poor in comparison to countries like the USA and China. At just 0.023% of Australia’s GDP, investments in technology within Australia is a slow developing asset class.

 

We need significantly more venture capital in this part of the world if we are going to identify and grow mor unicorns.

 

Topics: business, investors, Podcast, Startup, Entrepreneur, Venture Capital

Lucy Courtenay

Written by Lucy Courtenay