Unicorns and narwhals – what business do these creatures have in boardrooms and on stock exchanges?

"Unicorn" and "narwhal" are industry terms used to describe certain private start-up tech companies. "Unicorns" are start-ups valued by investors at $1B or more, a rare and substantial feat that has earned them their mythical nickname. "Narwhals" sit a stage below, vying for graduation to unicorn status.

The Canadian Unicorn Pipeline

The Toronto-based Impact Centre recently posted its 2019 Narwhal List (the List), which identifies nascent Canadian companies that may evolve into unicorns, as well as the financial avenues that can facilitate such transformations. Some of the report's notable 2018 statistics include the following:

  • The number of firms projected to become unicorns has nearly doubled.
  • The List's 25 technology companies raised an average of $40M in new capital, and its 2 healthcare companies averaged $100M.
  • The technology sector's average financial velocity (the amount of capital a company has raised divided by the number of years it has been in existence, expressed in millions of U.S. dollars per year) dramatically increased from 9.4 to 12.8, raising the overall financial velocity of Canadian narwhals to 14.6 (from 9.4). By contrast, the financial velocity of healthcare tech has continued to steadily decline.
  • None of the List's firms were sold or made IPOs in 2018.
  • The average narwhal in 2018 was 8 years old and had raised $105M since its inception (a marked increase from 2017's $66M).

The 10 leading Canadian narwhals from last year all hailed from a variety of sectors, including biotechnology, artificial intelligence, drug delivery and development, and consumer products, and were all founded between 2008-2016. The average Canadian narwhal operates in the internet software and services industry and is headquartered in Toronto.

Impact Centre's report also notes that Canada has yet to produce a unicorn since 2015, whereas the U.S. founded and graduated 19 companies in that same time. U.S. firms also boast a markedly higher average financial velocity. Unfortunately, Canada is also not keeping pace with comparable jurisdictions on a global scale – its peers are producing at least 2 new unicorns each year.

The United States: Unicorn Country

Crunchbase News also recently explored the unicorn market, focusing primarily on U.S.-based companies and producing more illuminating data:

  • New unicorns, compared to their predecessors, are more likely to acquire other small start-ups early in their lifecycle.
  • Most U.S. unicorn M&A is domestic (78%), meaning that firms are acquiring companies headquartered in the same country. Most other countries' unicorns were similarly localized in their dealings (e.g. only 33% of Canada's unicorns' M&A deals were cross-border).
  • Major acquisitions were made by ride-hailing, travel and accommodations booking, and music streaming companies, which turned their gazes internationally so as to break into and dominate less-saturated markets.

In summary, Canada is poised to produce more tech unicorns should its market stakeholders strategically nurture and invest in its domestic narwhals. As we have recently reported, global surges in tech-related M&A activity, from media to MedTech, evidence a worldwide market that is ripe for growth and investment opportunities. For Canada to be a hub of innovation in this developmental wave, its investors must continue to fund start-ups in the domestic unicorn pipeline.

The author would like to thank Sarah Pennington, articling student, for her assistance in preparing this legal update.


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