“Unicorn” start-ups (e.g. start-ups reaching a valuation of $1 billion or more) are to be pushed away from VC portfolios this year by steadier and slower “cockroach” companies, that may be able to survive the next bubble burst, or “a nuclear war”, writes Oscar Williams-Grut for Business Insider. As venture capital struggles with a slowdown of the world economy, “unicorn” companies can no longer count on easy VC money to secure continued growth, and cutbacks are becoming common – while VC’s are looking for safer and leaner havens for their investment.
In 2014, CIV research fellow Allee Zhang has published a paper discussing the VC model and its performance in the US, concluding that while the VC sector continues to raise funds, investing them eventually in less than 1% of companies described as “unicorns”, other start-ups are funded by alternative sources. The paper was published in the policy issue of Coller Venture Review, a publication of the Coller Institute of Venture, and shed a light on inefficiencies of the current VC model.
It may be wise for VC’s and venture policy makers to start looking for “cockroaches” as their next investments.