Once upon a time, there was an exclusive club that only allowed technology companies worth $1 billion to join.
While that sounds like an opening line to a fairy tale, it is not.
Two years ago, when only a handful of these heavily-funded companies existed, investors called these startups “unicorns” because of how rare they were to spot in the wild.
But things are changing.
Amazingly, there are now more than 50 technology companies in the U.S. that hold the unicorn designation — recognizable names such as Eventbrite, Instacart and Slack. As recently as January, only 38 companies belonged to the club, and that was up 150 percent from the year earlier when there were only 15, according to CB Insights, a venture-capital research firm.
The highly visible ride-sharing company, Uber, tops the list with a surreal valuation of $41.2 billion. Other noteworthy companies — worth more than $10 billion — include Snapchat, Pinterest, Airbnb and Dropbox.
Given the recent spike in billion-dollar tech companies, we asked one very simple question: Are there any unicorns in Seattle?
To find out, we checked three well-maintained data sources, and polled Seattle area investors who are familiar with a majority of deals in town. While hardly a scientific approach, the short answer to the question is: No, we have no official unicorns.
Data comes up empty-handed
We first started with CB Insights and The Wall Street Journal, which track companies that belong to the billion-dollar club, and both came up empty. Next, our hunt turned to Pitchbook. The venture capital data source revealed no unicorns in the Northwest.
The closest geographically was Hootsuite, backed by Seattle angel investor Geoff Entress and others. The Vancouver, B.C.-based social media monitoring company is worth exactly $1 billion.
But Seattle isn’t the only one missing out on the unicorn phenomena, with these rare creatures largely choosing the habitat of Silicon Valley.
The Wall Street Journal identified 80 companies worldwide with a valuation of more than $1 billion, with 54 of those based in the U.S. Twenty four are based in the San Francisco Bay Area; five in New York, and four in Beijing. Pitchbook’s data also identified Massachusetts as a potential breeding ground, spotting three unicorns there.
One company that comes close to being a Seattle unicorn is DocuSign, depending on where you place the company’s headquarters. While the electronic signature company started in Seattle and continues to have more employees here, its main offices are in San Francisco, where it’s founder and CEO are based,
The Wall Street Journal lists DocuSign as having a valuation of $1.6 billion.
Not as bad as it looks
But just because there aren’t unicorns in Seattle today, doesn’t mean that has always been the case. It’s just odd that now, as unicorns are on the rise, the number is zero.
The term “unicorn” emerged in 2013 following a provocative story in TechCrunch by Cowboy Venture’s Aileen Lee. At the time, Lee’s definition was slightly different from how unicorns are defined today.
She listed every company a decade or less old that had been recently valued at $1 billion — either by private or public markets. Since then, the measurement has narrowed considerably to include only privately-held companies.
Even then, geographic diversity was not a strong suit.
The vast majority, or 27 of the 39 companies on her list, were located around the Bay Area. However, at the time, Lee did include two Seattle companies: Zulily and Tableau Software.
Both Zulily and Tableau Software delivered on those big-ticket dreams, being valued at $2.6 billion and $2 billion at the time of their IPOs, respectively.
Other unicorn sightings
There are other companies that may have been overlooked by the big national data-tracking firms, or have sold or gone public, so they don’t technically count anymore.
One Seattle company that had a huge exit was PopCap. It sold to Electronic Arts nearly four years ago for as much as $1.3 billion.
At some point, the Bejeweled game-maker would have qualified, even though it ultimately may have fallen short since it failed to achieve certain earn outs.
Yet another company that could have been part of the club was Isilon, which was acquired by EMC for $2.25 billion in 2010.
There’s also Zillow. While its initial public valuation was less than magical at $540 million, the Seattle online real estate company is now worth more than $5.6 billion.
The list doesn’t necessarily stop there, either. Seattle area companies such as Bellevue game maker Valve and Renton software company Parallels usually don’t fall on any unicorn lists, due in part because they’ve built big businesses without much venture funding, and therefore it’s hard to grasp their true valuations.
Other companies appear to be getting close to unicorn status.
Multiple investors familiar with Seattle’s tech scene said that Redfin, the Seattle-based real estate company, and Apptio, the Bellevue, Wash.-based business analytics company, are on the verge.
Neither Redfin or Apptio would comment on their valuations for this article, but they do fit the profile, having received large rounds of funding from late-stage investors.
CB Insights lists T. Rowe Price and Tiger Management as two of the top eight investors when it comes to investing in the billion-dollar club. In November, Redfin raised $50 million in funding led by Tiger Global Management and T. Rowe Price Associates. Likewise, Apptio’s last round, totaling $45 million, was raised two years ago, from T. Rowe Price and others.
“We are the definition of a unicorn,” Apptio’s CEO Sunny Gupta said in an interview. “It’s amazing to me that these private companies are disclosing their valuation. We’ve been around for 7-plus years… We have always acted and run ourselves like a Silicon Valley company, but we are based in Seattle.”
Pitchbook, which claims to have actual valuations for privately held companies, says while both Apptio and Redfin come close, they aren’t quite large enough to claim one-horned beast status. At their last funding rounds. Apptio was worth $900 million and Redfin $813 million.
After that, the unicorns turn to ponies pretty fast. Seattle-based Avvo and Bellevue-based OfferUp clock in at $530 million and $500 million, respectively.
While both Redfin and Apptio were reluctant to specify their private values, both CEOs were eager to share their theory on why Seattle may not have any unicorns.
“One reason Seattle doesn’t have many unicorns is that a few like Zulily or Zillow have jumped the paddock fence and gone public, and some of the rest have been acquired,” Redfin’s CEO Glenn Kelman explained.
Gupta said Seattle’s lack of unicorns speaks to the tech community’s immaturity here: “I fundamentally believe that entrepreneurs in the tech industry in Seattle are still early stage,” he said. “Entrepreneurs aren’t thinking that big, so the first time someone knocks on our door, they sell their company.”
In fact, Gupta did the same thing in 2007.
When Opsware (now HP) offered to pay $70 million for iConclude, Gupta accepted. “If I hadn’t gone through that experience, if we hadn’t sold it, I wouldn’t have thought as big when building Apptio. There’s an element of success builds success — the second or third time you think much bigger.”
A big exit trumps a high private valuation
The rise of the unicorns have some people speculating that a bubble is underway, and while the jury is still out on whether values will come crashing down, the main reason why these companies are worth so much is because they are staying private longer.
Rather than going public, they have the choice of raising big rounds of capital from deep-pocketed investors.
Finally, because these companies aren’t traded publicly, knowing whether they would be worth that much publicly is hard to say. Ultimately, that’s why some believe dwelling too much on a private company’s valuation is not necessarily a good thing.
“Getting acquired or going public at a $1B+ valuation is the real sign of a unicorn,” said Hadi Partovi, an investor in Dropbox and other startups, who invests with his twin brother, Ali. “Just raising a private round isn’t a real valuation because the private shares have special privileges ahead of the others, and those are the only shares with that high valuation.”
Either way, Geoff Entress, an angel investor and venture partner at Seattle’s Voyager Capital who is a backer of Hootsuite, is confident there will be more in Seattle.
“I honestly don’t know of any companies that have actually raised at north of $1 billion yet, but I expect that several are candidates in the next year or two,” he said. “I would be surprised if we don’t see several unicorns emerge here, either as the private company $1 billion+ ‘unicorns’ or as $1 billion-plus public companies.”
The Super Unicorn
Finally, while Seattle may appear to be coming up short in the unicorn department, it has one thing that many other cities do not: A super unicorn.
In Lee’s first take of “The Unicorn Club,” she pointed to three unicorns that stand out from all others.
These companies give birth to a major wave of new technology. Of the modern-day super unicorns, there are only three and Seattle is lucky enough to have one.
If you didn’t already guess, it’s Amazon, which today is worth $175 billion The other two super unicorns are Google, valued at $365 billion, and Facebook, which boasts a market cap of $231 billion.
If you ask today if Seattle has any unicorns, the answer is no.
But keep your eyes peeled. There may be some unicorns emerging among us. Stay tuned.
