Adri Senekal de wet the Executive Editor at Independent Media Business Report.
Adri Senekal de wet the Executive Editor at Independent Media Business Report.

OPINION: Sagarmatha … sparking African unicorns​

By Adri Senekal de Wet Time of article published Nov 29, 2017

Share this article:

CAPE TOWN - The Fourth Industrial Revolution was shifting value massively towards tech companies, said Paul LaMontagne, 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 over a couple of billion dollars in its first eight years of existence and has yet to pay a dividend. Or Uber, it lost over two billion dollars last year.

The process of value creation and monetization spans many years and tech giants around the world use a similar play book”, LaMontagne 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 monetization.  According to Wikipedia, a unicorn is a start-up company valued at more than $1 billion. 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 more than $10 billion, while hectocorn is the appropriate term for such a company valued more than $100 billion. 

Ambassador Harold E Doley Jr, newly appointed chairperson of Sagarmatha Technologies International Advisory Board (IAB) and Paul Lamontagne, chief executive of Sagarmartha Technologies, shake hands after the announcement of the IAB board in Cape Town yesterday. Photo: Ian Landsberg/ANA

Africa is dramatically underrepresented in this technology Unicorn Companies club, with less than a hand-full. It’s really critical for the continent to benefit from the Fourth Industrial Revolution 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. 

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 LaMontagne explained: “At Sagarmatha, we’re working to provide the critical capital to help grow many of our platforms into Africa and through our Silicon 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 (WEF) 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 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 only had 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 only producing seven unicorns, and India, Indonesia and Africa one each."

Uber v Didi

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 to 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 – are often unfamiliar to people living outside of China.

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 $50 billion, 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 – have invested in 46percent of China’s unicorns, according to CB Insights.

But venture capitalists are also still taking a keen interest in Asia, with a record $56.4 billion projected to go to Asian-headquartered tech companies by the end of 2017.

This increased investment activity contributes to higher valuations that 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.

Adri Senekal de Wet is the executive editor of Business Report.


Share this article: