Pronounced Destiny
Rise of the Wundercorn 💫
Great worth takes great work, though, for some, it now takes far less time to achieve it. 🦄✨
Over the past 5 years, the growth of the broader private market economy has shrouded one of the most remarkable developments in private tech – the emergence of Wunderkind Unicorns, or Wundercorns.
Wundercorns; companies that reach a billion-dollar valuation within three years of founding.
Once an aberrant feat limited to a few era-defining names, wundercorn status has since become an achievable, though highly improbable, outcome. Today, wundercorns represent $585B in value across 152 private companies.
In this piece, we review the wundercorn phenomenon, examining questions such as: How do these companies scale so quickly? Which changes enabled this group’s explosive growth? To what extent does the path to wundercorn vary? Can this trend endure in a bear market?
To understand how these startups reach unicorn status in record time, join us as we go deep on all things wundercorn.
| Notable Wundercorns | |
|---|---|
| 2022 | Board Ape Yacht Club, Ankorstore |
| 2021 | Pipe, Ramp, Clubhouse, Chipper |
| 2020 | FTX, Hopin, Thrasio, Loft, SVOLT |
| 2019 | Anduril, Faire, Hims & Hers, Ola, Ualá |
| 2018 | Brex, Revolut, Bird, Lime, Luckin Coffee |
| 2017 | GRAIL, Nio, Mobike, SenseTime |
| 2016 | Opendoor, Pinduoduo, Xiaohongshu |
| Prior | Square, Xiaomi, Instacart, Snap, AirBnB |
Wundercorn Market Cap by Year ($M)
Source: Destiny Data, Pitchbook, CB Insights, Crunchbase, S&P Marketing Intelligence, Preqin, Refinitiv
Behind the Stampede
While wundercorn status has always been possible, a variety of market forces – both structural and ephemeral – have made it far more probable today.
Like their namesake, these companies achieve the unthinkable in record time; however, these incredible stories are no miracles – they are repeatable feats that are becoming more common than ever due to structural changes in the innovation economy.
These changes are focused on two areas: financing and operational execution.
Structural Shift
Financial
Heightened Inflows
Heightened institutional inflows producing record levels of dry powder in VC / growth equity. This is mostly here to stay irrespective of market volatility.
Operational
Global Markets
New levels of global connectivity with respect to customers, partners, and talent creates bigger markets.
Leverage
Startup tech has seen a Cambrian explosion of time-saving, force-multiplying startup infrastructure.
Advertising
Increased ability to deploy ad dollars effectively to scale go-to-market efforts predictably.
Distribution
Bottom-up software adoption shortens the sales cycle and simplifies market entry for consumerized enterprise products.
Ephemeral Trend
Financial
Crowing Kings Early
VCs preempting rounds at aggressive multiples. Backing leaders in winner-take-all markets, creating self-fulfilling prophecies.
Success Begets Success
Strong pipeline of exits as comps beget more optimism.
Operational
Growth at all costs
Market acceptance of high cash burn enables singular focus on growth without regard to durability, retention, customer experience, etc.
Financing
New institutional portfolio allocation models, paired with a vigorous appetite
for tech in the public markets have incited a fundraising boom over the past
decade, leaving venture capital and growth equity firms with record levels of
unused capital, or “dry powder.” Moreover, the universe of available investors
has expanded considerably with the emergence of solo GPs, crossover funds, and
others.
Until recently, high-growth startups have been the beneficiaries of a seller’s
market in which decorum has been shown the door and transient practices such
as preemptive term sheets, unfounded multiples, and a “growth at all costs”
mentality abound.
Many wundercorns created over the past year reflect this behavior,
particularly those in saturated winner-take-all markets.
While this influx of capital may have made many a wundercorn over the past few
years, it shouldn’t be expected to sustain this asset class’s growth. Record
pools of capital remain on the sidelines; however, the ongoing sell-off in the
public markets has started to work its way down to the private markets,
resulting in pulled term sheets, compressed multiples, and wide bid-ask
spreads for secondary transactions.
Operations
That capital is gushing into private tech across stages isn’t without reason: the very best companies can now get larger than ever sooner than ever before. As growth becomes an embedded function of technological progress, both the opportunity to grow quickly and to service this growth have contributed to wundercorn creation.
With the availability of time-saving, force-multiplying software, for instance, teams can now operate in a fraction of the time, expediting the time it takes stellar executors to scale.
Rather than hire an admin and a team of full-time software developers, a
founder today can run HR through Rippling, design an MVP in Figma, and hand
off her work to a team in a different time zone for front-end development.
Swaths of enterprise software companies now also provide startups with infrastructure that would have otherwise taken weeks or months to build, saving considerable resources and valuable time.
Paths to Wundercorn Status
So how do these companies become unicorns so quickly?
We Found Four (4) Well-Tread Paths to Wundercorn
1. Extreme Product-Market-Fit
Companies like Pipe, Airbnb, Faire, and Brex launched and scaled at breakneck pace due to their ability to service persistent issues that (a) were challenging enough that they hadn’t yet been solved for, despite the fact that (b) the time for solving them was now.
2. Second Mouse Gets the Cheese
Like the saying “the early bird gets the worm, but the second mouse gets the cheese,” these companies came late to market but differentiated through one or two core features that drove rapid adoption. Examples include Ramp (focus on expense management), Hopin (concerts and live events), and FTX (crypto derivatives).
3. X-for-Y: Reasoning by Analogy
In a similar vein to the prior category, X-for-Y companies took established business models elsewhere in the world – often in fintech, but occasionally in other areas – and tailored them to an emerging market. Examples include Ualá (Argentinian neobank), Chipper (African e-wallet), and Loft (Brazilian property search).
4. Riding the Hype Cycle
As buzzy trends populated the tech and venture scenes, a new class of hype-driven wundercorn emerged post-pandemic, led by the likes of JOKR, Thrasio, and Worldcoin. These companies – aligned with a faddish VC theme, typically raising at 30x+ multiples, and achieving unicorn status in less than two years – in 2021 alone represented ~$40B in value, larger than the entire market for new wundercorns in 2020.
Hits Keep Coming ⚾️
In a sputtering spot in the cycle, wundercorns continue to come to market at a prolific rate, with three recently raising bumper rounds in sectors that have been hit hardest by the tech sell-off:
Wonder (Food Delivery)
Round Details: $350M Series B @ $3.85B post
Marc Lore’s lure as founder of Jet ($3B+ sale to Walmart), partnerships with marquee NYC restauranteurs, and a surgical approach to go-to-market have helped the company buck the delivery dive facing DoorDash, UberEats, and others.
CRED (Consumer Credit)
Round Details: $140M Series F ($80M primary / $60M secondary) @ $6.4B post
Indian bill payments and rewards app is becoming a sprawling superapp through expansion that is equal parts inorganic (expense management, investing) and organic (lending, e-commerce). Group shopping feature à la Pinduoduo is promising.
Magic Eden (NFTs)
Round Details: $130M Series B @ $1.6B post
New round comes 3 months post-Series A and 9 months post-launch. NFT marketplace represents 97% of daily Solana NFT transactions and tops the charts in daily trading volume after passing OpenSea in May.
What Comes Next? 🔮
We see the rise of the wundercorns as a secular trend; however, the disproportionate share of those reaching unicorn status within 1-2 years of founding is likely ephemeral.
Hype cycles in crypto, e-commerce, and the sharing economy are unwinding, precipitating a retrenchment in investment in faddish, n-of-many companies at nutty multiples. Meanwhile, the comps used to achieve ambitious valuations well ahead of growth, particularly in areas such as cybersecurity and fintech, are now down as much as 80% in the public markets.
The early crowning of kings has come to an end. Growth at all costs mentalities have gone with it. Yet the core of what helps companies achieve such a special feat in record time – executional superpowers – remains.
Expect the composition of this grouping to move back to exceptional high-growth businesses in the first three categories.
