Low Interest Rates Fuel Unicorn Companies... Surpassing 500 Worldwide

Counted at 501 as of November... Increased by 250 in 2 years
70% are US and China companies... E-commerce and healthcare up despite COVID-19
11 Korean companies

[Image source=AP Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The number of "unicorn companies"?startups valued at over $1 billion (approximately 1.1 trillion KRW)?has increased to 500 worldwide. This rapid growth in investment in startups capable of securing high returns is a result of the prolonged era of ultra-low interest rates. Companies from the United States and China account for 70% of the total, and South Korea ranks sixth globally in the number of unicorn companies.

According to global market research firm CB Insights on the 27th, there are currently 501 unicorn companies worldwide that are valued at over $1 billion but are not publicly listed. Their total corporate value is approximately $1.592 trillion. The Nihon Keizai Shimbun cited CB Insights' data, explaining that "it took more than four years for the number of unicorn companies to reach 250, but it took about two years for that number to double."

The acceleration in the growth of unicorn companies is directly attributed to institutional investors increasing their investments in startups. Investors began to turn their attention to startups with investment potential as central banks around the world further lowered already low benchmark interest rates in response to the COVID-19 pandemic. The lower interest rates created the expectation that startups could generate relatively high returns if they grow. CB Insights also reported that in the U.S., a tech boom is spreading nationwide beyond traditional regions such as California, New York, and Massachusetts, leading to increased investment in technology startups across the country.

The rising stock prices of major IT companies like Amazon, Facebook, and Google in the U.S. stock market have also influenced the increase in unicorn companies. These companies, which started as startups, have achieved significant profits, raising expectations. Recently, unicorn companies such as Airbnb and Robinhood have been pursuing initial public offerings (IPOs), serving as representative examples.

Seventy percent of unicorn companies are from the U.S. and China. By country, the U.S. leads with 243 companies (48.5%), followed by China (118), India (25), the United Kingdom (24), and Germany (12). South Korea has 11 unicorn companies, including e-commerce firm Coupang and game developer Krafton. France has seven, and Japan has four unicorn companies. Nihon Keizai Shimbun analyzed that "to become a unicorn company, large-scale funding through venture capital is necessary, but in Japan, venture investment is small, and companies tend to raise funds through IPOs."

China's ByteDance is valued at $140 billion, making it the most valuable unicorn company in the world. Didi, known as the "Chinese Uber," follows in second place with a valuation of $62 billion. American companies such as SpaceX, the private space exploration company founded by Elon Musk, online payment company Stripe, and accommodation sharing service Airbnb are also ranked within the top five. By sector, fintech (financial technology) leads with 71 companies, followed by e-commerce with 64, and internet software and services with 64.

Many unicorn companies have emerged despite the COVID-19 pandemic. This year alone, 92 startups have been valued at over $1 billion. Although there were concerns that raising funds would be difficult due to the pandemic, startups with high corporate value have appeared in contactless and health-related fields such as e-commerce and healthcare, increasing the proportion of companies in these sectors. A recently added company is India's used car trading platform Cars24. The company rapidly grew as customers increasingly sought used cars instead of using public transportation due to COVID-19, and it was added to the unicorn list on the 24th. This is a representative case of a company growing by expanding profitability amid the COVID-19 pandemic.