Sagarmatha … sparking African unicorns
Working to provide capital to help grow local platforms
THE Fourth Industrial Revolution was shifting value massively towards tech companies, said Paul La Montagne, the chief executive of Sagarmatha Technologies.
The global investment community understood that building digital platforms and growing prime audiences took time and investment, he asserted.
“Take Amazon as an example: it lost a couple of billion dollars in its first eight years of existence and has yet to pay a dividend. Or Uber: it lost more than $2 billion last year.
“The process of value creation and monetisation spans many years, and tech giants around the world use a similar play book,” La Montagne noted.
There has been an explosion in the last few years of Unicorn Companies. The billion-dollar private-company tech club currently counts around 200 companies.
Encouraged by the growing recognition of blended valuation methodologies and investments from global tech giants and venture capitalists from around the world, unicorns have access to smart and patience capital that allows them to be disrupters and build up their platforms.
The scalability of these platforms at low marginal costs leads to consumer and/or business customer monetisation.
According to Wikipedia, a unicorn is a start-up company valued at more than $1 billion (R13.7bn). The term was coined in 2013 by venture capitalist Aileen Lee, choosing the mythical animal to represent the statistical rarity of such successful ventures.
A decacorn is a word used for those companies worth more than $10bn, while hectocorn is the appropriate term for such a company valued at more than $100bn.
Africa is dramatically under-represented in this tech- nology Unicorn Companies club, with less than a handful. It’s crucial for the continent to benefit from the Fourth Industrial Revolution, and that the true value of African technology companies be recognised so that they have the currency to compete on a level playing field with global tech players.
Local markets This way, African companies with keen insight into local markets can take advantage of the impending growth of the continent in terms of population, middle-class consumers and overall gross domestic product.
An animated La Montagne explained: “At Sagarmatha, we’re working to provide the critical capital to help grow many of our platforms into Africa, and through our Sili- con Africa vision, provide the spark that will lead to many more African unicorns in the future.
“Sagarmatha believes in creating value in Africa, and so does our international advisory board, composed of savvy global business leaders and investors. This is Africa’s time and we believe that now is the right time to invest in the Africa story.”
Business Report (BR) is currently examining the phenomenon of unicorn companies, described by the World Economic Forum as powerful forces of disruption, wherever they are found.
This report offers a global view of the distribution, reach and impact of unicorn companies.
California’s Silicon Valley remains a dominant breeding ground for billion-dollar start- ups, but China is catching up fast, the report states.
So far this year, 46 global technology companies have reached unicorn status, according to research from CB Insights. Of those, China has produced 17, only slightly fewer than the 19 created in the US.
The growth is dramatic, given that in 2014 China had only eight unicorns. Now it has 56. And four out of the global top 10 biggest unicorns are from China.
Other areas of the world lag significantly behind, with Europe producing only seven unicorns, and India, Indonesia and Africa one each.
The most ubiquitous unicorns, Airbnb, Spotify, Uber, Dropbox and Pinterest, have entered our lives and lexicon with services as easy, accessible and familiar as popping into the supermarket.
Others tend to be known when used in a work context or because of a specialist interest; the flexible office space firm WeWork, Elon Musk’s aerospace company SpaceX and the data analysis start-up Palantir, which specialises in anti-terrorism, for example.
But Chinese unicorns – such as transport firm Didi Chuxing, bike-sharing start-up Mobike, smartphone-maker Xiaomi or online food delivery service Ele. me – are often unfamiliar to people living outside China.
Dominate Much of their power and scale comes from the size of the Chinese marketplace that they dominate.
In fact, Didi Chuxing, which has an estimated value of $50bn, last year defeated Uber – the world’s biggest unicorn – in a battle between the two transport start-ups, having won a rare and significant investment from Apple.
Most of China’s new class of unicorns are in the e-commerce and online marketplace industries, a reflection of the growth of China’s middle class, with its ever-increasing appetite for online goods and services. Follow the money The ability to produce unicorns depends on investors willing to stump up the cash, as well as consumers willing to buy the product or service.
China’s largest internet giants – Baidu, Alibaba, Tencent and JD.com – have invested in 46 percent of China’s unicorns, according to CB Insights.
But venture capitalists are also still taking a keen interest in Asia, with a record $56.4bn projected to go to Asian-headquartered tech companies by the end of this year.
This increased investment activity contributes to higher valuations, which in turn encourage more big-ticket investment from the likes of Apple, Facebook or Google. Global ambitions? While the rise of the Chinese unicorns is interesting in itself, it may be even more fascinating to observe what they do (and where they go) next.
Recently, Chinese bike-sharing start-ups Mobike and Ofo have begun to talk about their ambitions to expand globally. Can these firms, which have captured the Chinese markets on such a large scale, translate their offering to a global audience?
Unicorns may be a statistical rarity, but there’s nothing mythical about the rise of China’s start-up scene. It’s time for the rest of the world to pay closer attention.
Editor’s note: Sagarmatha Technologies certainly aims to compete with global technology giants such as Amazon, Facebook, Google, Alibaba and/or Tencent and Naspers.