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UK unicorns club welcomes newest member, but what is a unicorn and how can you invest in them?

More companies are raising more money privately than ever before, but there are still ways to invest

The UK can today boast more than 30 active ‘unicorns’, as another young challenger was added to the ranks.

Used car marketplace Motorway said on Monday morning that its valuation had topped US$1bn (£0.75bn) following a fresh US$190mln funding round.

This means the company now gets awarded its honorary sparkly horn, under the unstated rules of business unicorn classification.

Depending on your sources, Britain’s business landscape suffers from a deep sickness, or is an increasingly fertile source, but either way it counted at least 80 unicorns at the start of 2020, with the running total topping 100 several weeks ago (and let’s not even mention ‘futurecorns’).

Many of these fantastic beasts share similar characteristics –  but overwhelmingly have a strong tech element.

Like many of its single-horned ilk, Motorway was founded only a few years ago (2017) and has grown very fast. Other similarities include a string of venture capital backers, in this case Index Ventures, Latitude, Unbound and ICONIQ Capital, along with industry investment in the form of BMW i Ventures.

The London Stock Exchange has welcomed several former unicorns in the past year and a bit, including Darktrace, Hut Group, Oxford Nanopore and Wise, while some like electric vehicle developer Arrival SA and car marketplace Cazoo Group Ltd (NYSE:CZOO) have chosen to list in the US.

The trend to remain private for longer, known as ‘de-equitisation’, still remains and there are various reasons.

It is partly because companies can access plenty of funding from venture capital firms and other forms of private equity, with these firms also providing support, expertise and business networks to help accelerate growth.

“Private equity owned businesses tend to grow faster and are often in segments or sub-segments of industries that are badly represented on public markets,” Helen Steers, a partner of Pantheon Ventures and advisory board member for many VC funds, told us earlier this year.

UK’s notable unicorns

Britain’s best-known unicorns are possibly led by Brewdog, the Scottish owned brewer, which has been eyeing up a public listing for a while but keeps stumbling into new issues.

Are there more people who have sunk a can or pint of Punk IPA or Dead Pony Club or who own a Revolut business and current account? Either way, the fintech star has by far the larger valuation, calculated at US$333bn in July as it raised US$800mln. This made it bigger than NatWest Group, Legal & General and Aviva.

Perhaps even better known outside of the City is Monzo, another where a stock market listing is also mooted for the digital challenger bank founded in 2015. Although its current accounts and coral-coloured cards have some attractive features, the company has not been free of trouble, with the Financial Conduct Authority currently recently launching an investigation over potential breaches of UK rules related to anti-money laundering and financial crime controls.

Zopa, which has secured Japan’s SoftBank as a backer and in October and hence also its unicorn status, is not one of the best known but the peer-to-peer lender is one of the oldest. It was started up in 2005 and has been making bigger steps in recent years, with its banking licence approved last year.

Other fintech unicorns to watch include digital-only challenger banks OakNorth, Starling Bank and Atom Bank, payments companies Checkout.com, Rapyd and SaltPay, along with money transfer company Zepz.

And of course there must be a cryptocurrency unicorn, and that is Blockchain.com. Born out of a flat in York in 2011, the company has attracted a £75mln investment from FTSE 100 tech investor Scottish Mortgage Investment Trust PLC (LSE:SMT), which also backed the abovementioned Anglo-Brazilian outfit SaltPay. Blockchain.com was valued at US$5.2bn after its latest fundraising.

Outside finance, Gousto, the online meal-kit manufacturer and retailer backed by Joe Wicks, won its unicorn badge last November, in a year when it delivered 53mln meals to households in the UK.

A relatively new name is Britishvolt, the developer of a planned electric vehicle battery plant in Northumberland, which was only founded in 2019 and won its prized horn this September when it was valued at £800mln, or over US$1bn.

The founders of Gymshark, the online-only sportswear brand, have sweated since being founded in Solihull in 2012, using social media influencers on YouTube and Instagram to build the brand.

Investors in public markets may not be able to get direct access to unicorns, but some of the largest are looking to throw off their horns and launch a public listing, while it is also possible to invest in investment trusts that focus on private equity, including Pantheon International PLC (LSE:PIN), HarbourVest (LSE:HVPE) Global Private Equity Ltd and HgCapital Trust PLC.

What’s more, there are special-purpose acquisition company (SPAC) companies, such as Hambro Perks Acquisition Company, that plan to use their public listing to merge with a unicorn.

Read More: UK unicorns club welcomes newest member, but what is a unicorn and how can you invest in them?

2021-11-29 10:20:00

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