It is time to put the childhood stories of unicorns – as single-horned creatures that bounce through fairy-tale landscapes – to bed. The myth has emerged into a very real phenomenon in the business world. These days, unicorns are start-ups with a company valuation exceeding $1 billion, and these businesses are thriving, particularly in the UK where 18 of the 47 European unicorns reside.
A recent study conducted by the Harvard Business Review monitored the growth of start-ups founded between 2012 and 2015. The review discovered that these start-ups are now growing in valuation twice as fast as those created in the decade beforehand. In Europe, more than a third of unicorns are founded in the UK and they are cumulatively valued at a whopping $39.6 billion.
A number of the UK’s unicorns reside in the fast-growing fintech sector. However, in the aftermath of Brexit, founder of TransferWise Taavet Hinrikus made headlines when he warned that the UK was at risk of losing its position as the world’s number one hub for fintech. According to Hinrikus, the prospect of Brexit is creating uncertainty, and this uncertainty threatens the UK’s attractiveness to innovative start-up companies.
The fear is that Brexit will impede upon the tech industry’s ability to hire talent from abroad and will threaten the status of existing non-UK tech workers. Loss of passporting rights has also prompted several prominent companies to search for new European headquarters.
Yet the general attitude amongst unicorns has not been one of despair, but rather a willingness to make the best of the situation.
Global online food ordering service Just Eat, which moved its offices to London six years ago, even went as far as to argue that Brexit would have little material impact on the business, despite the company’s presence in a number of European markets. AO.com released a similar statement on the unlikeliness of any exit impacting its European trading.
This reaction should not come as a surprise. Those already-established unicorns are unlikely to be affected significantly by Brexit because high-profile failures are uncommon in Europe, partly due to higher barriers to entry. The average revenue of a European unicorn, for instance, is $315 million compared to only $129 million in the United States.
Some billion-dollar ideas also thrive in economic hardship. People flock to apps like Skyscanner to make savings on flights, with American company Jet.com reaching the $1 billion milestone four months after it was launched in 2014, simply by offering savings on products to consumers. The majority of UK unicorns were also set up post-crash, and prospered during the recession.
Chancellor Phillip Hammond also raised hopes at the International Fintech Conference in April when he assured onlookers that Brexit would “open the doors to new opportunities” and that the government would attract the type of investment they needed to grow.
This is particularly important given that banks tend to tighten up on lending during times of economic hardship, and this results in individuals with creative ideas seeking funding from alternative lenders and investors.
For now, the hope will be that whatever the Brexit deal is, it still allows start-ups to thrive in the same way that those before them did. We need to see UK start-ups continually joining the ranks of the prestigious and established unicorn alumni.
Peter Tuvey is the co-founder of Fleximize.
