India, Spain and Argentina in search of the new “Unicorn”

by Moris Beracha

Start-up companies, supported through financial formulas such as venture capital or private equity, are preferred; according to statistics.

Moris Beracha.- The race to hunt the next “Unicorn” – which is the name given to start-up companies valued at more than $1 billion – has expanded and is injecting adrenaline in investors from India, Spain, including Argentina. Start-up companies, supported through financial formulas such as venture capital or private equity, are preferred; according to statistics.

A few days ago, The Economic Time reported that India’s foreign direct investment broke all previous records since private equity firms invested a record $11.3 billion in the first quarter of 2017, getting deployed across 124 deals signed, as foreign capital backed compelling themes in sectors as diverse as healthcare, manufacturing, insurance and business process outsourcing.

This is due to the fact that start-up businesses in India are formed by a generation of young people who are searching an important place in the list of the most profitable and valued companies in the world. Getting a $1 billion value has become a professional challenge and  because of the changes occurred within the traditional financial market, venture capital is a much simpler encouraging option, and also adds value and brings expertise . The private equity funds assigned are beginning to be of great interest.

In Spain, this race in search of the Unicorn has found in private equity an alternative to the consequences of credit drought, caused by the crisis that still hits entrepreneurship. Likewise, small and medium-sized companies that depended on bank loans and were so affected have managed to breathe calmly in certain specific cases thanks to the decision to approach the business model of venture capital.

According to the report of the Spanish Association of Capital, Growth and Investment (Ascri), the volume of investment of venture capital entities in the order of $3.5 billion at the end of the first half of 2017 represented 33.6% more than the same period of the previous year.

It is very interesting to see which sectors were interested in this type of investment and this is how we find hotel and leisure with more than 25% of the total investment, followed by consumer products with 10.6% of the total; communications with 9.6%; information technology (IT) with 8.1%; and energy and natural resources with 8%.

However, concerning the number of projects, the IT sector was the first with 250 start ups and SMEs funded; an incomprehensible number years ago. If the new Unicorn is among them, we will have to wait and see.

The change of the new government in Argentina has opened a new chapter in which there is a great interest in investing in entrepreneurs and start-up companies not only with new ideas, but with a global or regional profile, which distinguishes them from businesses in Spain and India in general. The perspective is to try to find a niche with a lot of growth potential to achieve the longed-for Unicorn.

An article published in the newspaper Clarin reported a few weeks ago that in recent years, some 300 investment funds (venture capital, business angels, seed capital, private equity and corporate accelerators) were subject to approval, in a long list on which Kaszek Ventures, Wayra, NXTPLabs and AxVenture figure.

The items that apparently have a relevant strategic importance in Argentina include agriculture, renewable energies, finance and technology.

I noticed that the same article referred to the Visa case, which calls for startups Visa’s Everywhere Initiative. The idea is that those participants will have a chance to win a $50,000 prize by supporting a development program with Visa’s product or service and contribute to develop the future of electronic payments.

This indicates that even large financial companies are looking for ways to diversify their businesses through innovative projects that could soon become valued companies. This is how the Unicorn hunting competition is driving the emerging business world in most parts of the world.

 

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