Start-up unicorns no longer mythical beasts

Initially used in the venture capital industry a decade ago to refer to privately owned start-up companies worth USD 1bn, the word unicorn was intended to reflect their rarity. Since then, such valuations have become more common, and corporate unicorns have become easier to track down than their mythical horse-like namesakes.

And while the world’s technology hubs, such as Silicon Valley in the US, Tel Aviv, Stockholm, London, Berlin and Bangalore, have become recognised breeding grounds for unicorns, emerging Europe has also established itself as a successful stable for rearing these fast-developing businesses.

According to a report by Google, Atomico and Dealroom published at the end of 2021, 34 unicorns had been created in central and eastern Europe, including the Baltic states. In 2015, the corresponding figure was just six. Tallinn in Estonia is in particular seen as a serious contender among those international technology hubs, but analysis by CMS’s Business Intelligence team shows how other areas in the region have contributed to the surge in young and highly valued technology businesses.

The latest contenders

Three of the region’s top six unicorns come from Poland and the Czech Republic:

• Docplanner Group, founded in Poland in 2011, reached unicorn status in 2021. It is a booking platform and software planner for doctors, operating across 13 countries in Europe and Central and South America.
• Rohlik, founded in the Czech Republic in 2014, reached unicorn status in 2021. It is a European leader in e-grocery technology. It is active in the Czech Republic, Hungary, Austria and Germany, and launching in Romania, Italy and Spain.
• Jetbrains, founded in the Czech Republic in 2000, reached unicorn status in 2020. It supplies development tools for software developers. Its products are used in 220 countries, and it has ten offices around the world, 1,900 employees and 2.5 million customers.

Of the others, two come from Estonia (transport app developer Bolt and online identity verification company Veriff) and one from Lithuania (second-hand clothes marketplace Vinted).

The list of unicorns produced in the region since 2012 and which have since moved overseas or have become publicly listed includes: Avast of the Czech Republic, which listed in London; Grammarly, whose Ukrainian founders are now based in the US; PandaDoc, which started life in Belarus and Ukraine and is now based in the US; Playway of Poland, which listed in Warsaw; Huuuge of Poland, now listed in Warsaw, and InPost of Poland, which is listed on EuronextAmsterdam.

Uipath, the robotic process automation software company, is a notable example of a regional unicorn that has become a player on the world stage. Started in 2005 in a small office in Bucharest, in April 2021 it became the first Romanian company to list on Wall Street when its market value reached USD 35bn on the first day’s trading. Along with other US technology stocks, its shares have fallen in 2022 and its market value at the end of the year was around USD 7bn.

Soonicorns coming up fast

The region has become a magnet for investors thanks to the innovation of its entrepreneurs, supported by the increasingly sophisticated technology and financial ecosystem around them. This has fostered the creation of digital challengers with the capacity to grow into local and regional champions, and ultimately into global challengers that can stand alongside world-beating companies. Investors’ growing interest in the region as a technology hotbed is reflected in the high level of M&A activity in the telecoms and IT sector covered elsewhere in this report.

Coming up fast behind the unicorns is the next generation of companies regarded as having the potential to break the USD 1bn barrier within two years. These “soonicorns” are popping up across almost all countries in the region as founders develop technology solutions to meet the needs of an increasingly tech-savvy population. Among them is another of Romania’s rising stars, Bitdefender, the cybersecurity software business which now has offices across Europe, North America and Australia.

The talent and financial backing that has produced the current generation of unicorns shows no signs of abating, and if anything, it is only increasing in depth and reach. It might be too soon to talk of herds of unicorns sweeping across the continent, but USD 1bn start-up companies are set to become a more familiar sight on the corporate landscape in emerging Europe.