1999 was the year the tide of the dot.com bubble ebbed, when people stopped writing and reading fantasy articles about that myth – I happened to be apprenticing in VC in NYC at that time, it was wondrous.
Twenty years later, and the tide is turning on another fantastic beast, the mythical unicorn … an investment that is SO big, it consumes all who chase her … the UNICORN HUNTERS.
And like the best fantasies – Harry Potter, Lord of the Rings, Game of Thrones – without caring to analyze, we are unconsciously attracted some empirical truth that forms the basis of the myth.
And so, it is with unicorn investments. Look at the numbers.
In successful VC funds, only the top 25% return anything like a risk adjusted IRR, and of those, 6% of their investments in portfolio companies contribute 60% of the returns. For the masochists reading this, I have the spreadsheets that model VC fund performance.
For Northern Ireland with a (say) £20M fund, aiming to get in the top 25% of performing venture funds (which AFAIK has NEVER been accomplished) a PRE-REVENUE startup that shows £50M revenue in year six is an NI unicorn.
The ALGEBRA only needs a revenue of £25M, but the ALCHEMY says that NO-ONE ever makes their forecasts – especially at pre-revenue stage, so we discount tit by 50%. And of course, the ART is the ability to spot the unicorn from the Cerberus. And if you want to call that investment that makes the funds a unicorn, that’s OK.
So, for any intrepid unicorn hunter, the target of the hunt (in Northern Ireland) is a pre-revenue company, showing a 100% inflated revenue of £50M in year-6, looking for £250K seed on a pre-money of £750K .
.. and you’ll never bag a unicorn if you don’t get in the hunt.