Monday, 22 February 2016

What can unicorns tell us about the real world?

Currently hiding behind an IAM paywall, but none the less interesting for all that, is a piece by Aistemos CEO Nigel Swycher and his colleague Sebastian Müller-Borges entitled "What unicorns can tell us about the real world". The traditional unicorn is a mythical beast and the 21st century corporate version is pretty rare [when this blog post went out, there were just 146 of them according to the WSJ unicorn-counter and 159 in the TechCrunch unicorn leaderboard-- showing a sharp rise over the tally of 115 on which Aistemos reported six months ago]. This being so, one might have thought that there wasn't much that unicorns can teach any of us -- except a few things we already know, like
* investors, financial analysts and journalists are fascinated by large sums of money [this is why we are now being taught to pay even more attention to "decacorns" -- unicorns sitting on a cash pile in excess of S10 billion];
* "unicorn" sounds a lot more attractive than "relatively new business with more cash than experience or intangible assets"; 
* investors are encouraged to put their money where other people have previously put theirs, on the basis that following the herd is the same thing as the wisdom of crowds.
"What unicorns can tell us about the real world" builds on an earlier piece of Aistemos research, "Billion dollar startups -- do unicorns like patents?", noted shortly on this weblog here last September and now available on the IAM website here.  It provides plenty of current patent- and finance-related data (a sample of which we reproduce here).


Unicorns by sector
The figure above is an interesting one, in that it shows the dominance of patents in the fields of software and computing, patents which have now come under pressure following the 2014 US Supreme Court Alice ruling on the patent-eligibility of computer-implemented abstract ideas. It will be good to watch these figures over time, to see whether the increasing difficulty in obtaining and defending patents for computer-implemented inventions may be reflected in the diminution of that statistical dominance.

Where do unicorns come from? There is no significant unicorn community outside of the US and China, though India is closest to catching those jurisdictions, as the figure below shows. For all its long-expressed commitment to encouraging investment and protection of innovation, the European Union has made little impact on the overall scene.
Unicorns by country

The figure below shows that, while the aggregate numbers show that US companies exist in greater number, it is the Chinese unicorns that have shown the fastest rate of patent-filing growth. They are however more likely to confine their filing to their home market than to make an initial play for wider patent protection:


Top 10 patent-owning unicorns: patent portfolio size and growth

After warning about the dangers of drawing too many conclusions from too little data, and observing that companies are increasingly expected to explain their IP policy (or lack of it) for the benefit of investors, the authors conclude:
"What unicorns tell us about the real world is that no two companies, sectors or geographies are the same from an IP perspective. However, understanding these differences matters. The significant advances in the availability and accessibility of IP analytics mean that there is now greater transparency about who is doing what and why. Gone are the days when understanding the importance of patents was confined to IP specialists. While unicorns are rare and magical, patents are the manifestation of real-world innovation".
Reminder: you can read the IAM piece in full here.

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