Each year the folks at Fast Company and CB Insights publish a list of the 50 companies CB Insights considers most likely to become unicorns. (See here.) CB Insights determines its 50 Future Unicorns 2020 List based on an algorithm they call Mosaic which you can read about here. Suffice it to say the algorithm weighs the market, the money raised, and the momentum (buzz) around a company. The median amount raised by the companies on the 2020 list is $125 million. As a result, this list represents the zeitgeist of what has been happening in VC over the past couple of years.
50 Future Unicorns 2020: Enterprise and Fintech Edition
If you segment the list by type of start-up, you will see half of the companies are either in Enterprise/Big data tools or Fintech. Since “data is the new oil” (or gold), there are many people selling picks and shovels! And if “software is eating the world”, it is certainly munching on payments as well! Last year, you had to hunt for the enterprise start-ups, this year it is the other way around.
Four of the Future Unicorns
Four companies stood out for me because I know their markets, but not the companies:
Divvy is in the travel and expense management market with the likes of Concur and Emburse. (Emburse comprises Chrome River, Certify, and a bunch of other brands). Divvy combines expense management software, virtual cards, and booking through Trip Actions to offer small businesses a free solution. Divvy wants to make its money on the interchange from the cards. It’s a capital intensive, but interesting strategy. No single part of the strategy is unique, but the combination and business model is. Emburse seems to have responded to Divvy by adding virtual cards as well. This may be another case of business models colliding. I love those.
The contract authoring category has been around a long time as part of legal technology. No one has really killed it in contract management by targeting the legal department, but that seems to be what Ironclad is doing. Others, such as Icertis, have turned contract management into contract lifecycle management and targeted sales and/or procurement. Can contract management with a focus on the legal department buying center produce a unicorn?
Moglix is based in India. The company is that country’s answer to Amazon B2B or a more e-commerce oriented Grainger. The company now seems to be entering the UK and Europe. Amazon B2B did not arrive in India until 2017 and Grainger is not very present in India. Perhaps there is room for Moglix against Indiamart and other domestic competitors.
There are many companies that provide audit and checklist software. (Audit and checklist software is a part of the burgeoning EHS or compliance sector.) It’s really a simple thing to do technically. After all, it’s just a form or survey with workflow. (I have always wondered by Qualtrics or SurveyMonkey did not also get in this space.) In any case, this Australian company has built a very simple, freemium, seemingly mobile-first system for building audits, checklists, and monitoring sensors. From the outside, SafetyCulture looks like a classic case of disruption from the bottom-up. The company has made several acquisitions and says it is even going to get into selling business insurance with rates tied to its results. SafetyCulture has come to the US and will now have to do battle with a bunch of suite competitors.
CB Insights has about a 50% hit rate in predicting unicorns over a 5 year period. Let’s see which of these four becomes a unicorn and stays that way. I will try to remember to check back!