First came the unicorns. Then came the decacorns. Now people are talking about dragons, centaurs, and even ponies.
The world’s tech startups, the people who finance them, and the journalists who write about them, appear in thrall to some sort of collective mass delusion in which startups must be classified according to an increasingly complex taxonomy based on their funding prowess that’s apparently derived from a Dungeons & Dragons rulebook. For the benefit of those readers who come into contact with this increasingly obtuse jargon, here is a brief guide:
The original metaphor. Tech startups valued at $1 billion or more were once so rare—all the way back in late 2013—that they were named for a mythical horned creature. For venture capitalists, investing in a company that was later valued with nine zeros after the first number was considered an amazing feat, akin to catching a creature of whose existence no physical evidence exists. As a metaphor, it is not perfect but it gets the point across. Until, of course, unicorns became as commonplace as horses on a ranch, which led to the invention of the…
What happens when you cross a unicorn with the metric system? You get a “decacorn,” a term first revealed to the world in March this year by Bloomberg, which described it as “a made-up word based on a creature that doesn’t exist.” A decacorn in Silicon Valley, however, is a startup that is valued at $10 billion or more, invented to set companies like Uber, Airbnb, Dropbox, Snapchat and their ilk apart from the common one-horned beasts worth a piddling $1 billion.
The other way of addressing “corn” inflation is to change the game. Investors John Backus and Hemant Bhardwaj suggest that their peers should “look beyond the unicorn and find the dragon” because “unicorns are for show. Dragons are for dough.” What is a dragon? The pair did the fantasy-mythology math and concluded that dragons are much rarer than unicorns. More literally, a dragon is “a company that returns an entire fund,” which in plain English means a single investment that pays off as much as a diversified portfolio of investments normally would. Outside the tech world, this is also known as “winning the lottery.”
No one can blame venture capitalists for only thinking big. They also deal companies worth less than $1 billion sometimes, and need other mythical monsters to describe them. Dave McClure, founding partner of investor 500 Startups, calls companies valued at over $100 million (but presumably no more than $999,999,999) “centaurs“, which are creatures with the torso and head of a human and the body and legs of a horse. The equine theme remains.
McClure does not say what makes centaurs so much less rare than unicorns, nor does he explain why they aren’t called “decicorn,” in keeping with the metric-system theme.
Also a McClure coinage. These are companies worth less than $100 million and are therefore, in Silicon Valley finance circles, entirely believable creatures. This may also derive from the American phrase “pony up”, which means to have to pay back a debt, often under some pressure.
Here’s a handy chart to keep track:
Put all these fantasy creatures (and ponies) together, and you get quite a petting zoo. It kind of makes sense if you think about it: The tech industry is fond of building mythology around its biggest firms. And as many have noted, the valuations for which these startups are thus named are often fantasy too.