A glimpse of unicorn startups

Startups are deemed unicorns – mainly if not all are technology driven – are those valued at least US$1 billion, and a statistical report says unicorn startups account for less than 0.08% of all startups. That is to say unicorns are few and far between.

A common thread for unicorn startups is that their products or services are breakthrough ones that can make profound changes to the business areas they operate in. Needless to say, social media has been changed upside down following the launch of Facebook; similarly is the introduction of Google that has revolutionized the development of search engines. And, in the past few years, the transport service sector has been “reborn” with the launch of Uber, while OpenAI with ChatGPT has sent strong ripples through all aspects of society.

From global unicorns…

As of October 2022, according to CB Insights, there were over 1,200 unicorns worldwide, and still counting.

There are startups reaching the unicorn status after well-planned preparatory and investment processes by big corporations, such as SpaceX by billionaire Elon Musk, but there are also startups gaining incremental development over a long period of time to become unicorns after being “accidentally created” to meet a certain demand – sometimes personally.

A unicorn startup becoming greatly popular these days is Dropbox, a file hosting service operated by the American company Dropbox, Inc., headquartered in San Francisco, California, that offers cloud storage, file synchronization, personal cloud, and client software. Dropbox was accidentally created in 2007 by MIT students Drew Houston, who came across the Dropbox concept after repeatedly forgetting his USB flash drive while he was a student at MIT. He then partnered with Arash Ferdowsi to establish Dropbox as a startup company, with initial funding from seed accelerator Y Combinator. Dropbox is also in the list of Plug and Play’s portfolio companies, having received investment from the technology accelerator.

In fact, Houston initially set up Evenflow, Inc. as the predecessor of Dropbox. At the annual TechCrunch Disrupt in 2008, the company was formally introduced, and one year later, Evenflow, Inc. was renamed Dropbox, Inc.

Then came the warp speed in the company’s acceleration stage. It surpassed the one-million registered users milestone in April 2009, followed by two million in September, and three million in November. It passed 50 million users in October 2011 before doubling to 100 million one year later, 500 million in 2016, and 700 million in 2021.

Dropbox uses a freemium business model, where Dropbox Basic users are offered a free account with a set storage size of 2GB. The Dropbox Plus subscription, at US$9.99 a month, gives users 2 terabytes of storage space, as well as additional features. There is also Dropbox Family, at US$19.99 a month, which also has a set storage size at 2TB and allows up to six users on a single account.

Last year, Dropbox reported a revenue of US$2.32 billion and a profit of US$181 million. The company is now valued at around US$8.8 billion.

Another well-known global unicorn is PayPal Holdings, Inc., a US-based multinational corporation that operates in almost all countries that allow online payment services. The company, also in the list of Plug and Play’s portfolio firms, operates as a payment processor for online vendors, auction sites and many other commercial users.

Established in 1998 by Max Levchin, Peter Thiel and Luke Nosek under the name of Confinity, the company initially developed security solutions for handheld devices before shifting to e-wallet services. The first version of PayPal e-payments system was launched in this same year.

In March 2000, Confinity was merged into X.com, an online financial service startup founded by Elon Musk, Christopher Payne, and Ed Ho. In October 2000, Musk decided that X.com suspended all online banking services to focus on payment services only. In that month, Peter Thiel replaced Musk as CEO of X.com, and changed its name to PayPal in June 2021.

PayPal launched its IPO in 2002 and secured US$61 million, becoming a public company. It became a wholly owned subsidiary of eBay later that year, valued at US$1.5 billion. More than 70% of all eBay auctions accepted PayPal payments. PayPal became the default payment method used by the majority of eBay users.

In the acceleration stage, PayPal acquired the VeriSign payment solution to provide added security support, and announced a partnership with MasterCard in 2007 that led to the launch of the PayPal Secure Card service, a software that allows customers to make payments on websites that do not accept PayPal directly. By the end of 2007, the company generated US$1.8 billion in revenue.

In August 2012, the company cooperated with Discover Card, allowing users to make payments via PayPal at any of the seven million stores in the Discover network, and by the end of 2012, the total value of payment processed by PayPal amounted to US$145 billion. In 2015, PayPal became an independent company again.

During the course of development, PayPal has managed to acquire numerous enterprises to expand its ecosystem. The most notable transactions include the acquisition of Swedish payment processor iZettle for US$2.2 billion, and the deal to purchase Honey for over US$4 billion in early 2020, the latter transaction being the biggest acquisition made by PayPal.

In the fiscal year 2019, PayPal gained a sizeable profit of nearly US$2.46 billion and a revenue of US$17.77 billion, rising 15% year-on-year. The market cap of PayPal as of December 2019 was US$127.58 billion.

The above two unicorns are not necessarily representative of global unicorns, since there are numerous other startups that have shot to stardom within just a short span of time. That could be Stripe, a credit card processor in Silicon Valley that has facilitated millions of enterprises to make payment. Stripe was valued at US$95 billion in 2014, only four years after its inception with US$300 million of investment.

There are also many other typical unicorns, such as London-based Checkout.com specializing in e-commerce and fintech that was valued at US$40 billion, or Databricks in San Francisco specializing in cloud service that was valued at US$38 billion in 2019, only six years after its establishment.

… to unicorns in Vietnam

There are four of them.

By the end of 2021, two more Vietnamese startups, MoMo and Sky Mavis, reached the unicorn status, besides two unicorns recognized earlier, VNG in 2014 and VNLIFE in 2019. These four Vietnamese technology unicorns are still modest compared to global peers.
However, with four unicorns recognized, Vietnam now ranks third in the region, behind only Singapore and Indonesia, according to Forbes Vietnam.

The first Vietnamese unicorn is VNG, which was established in September 2004 under the name of VinaGame. This startup’s initial business focus was to issue games online.

The first milestone was set by VinaGame in 2005 when the company released the game Vo Lam Truyen Ky (Swordsman). In ten years’ time, the game attracted as many as 20 million gamers from all walks of life, including doctors, teachers, artists, workers and civil servants.

Following this initial success, VinaGame released numerous other games, and by 2006, the company had earned US$17 million. VinaGame later expanded its business scope to other spheres like e-commerce, social media, digital music, and e-wallet among others. VinaGame changed its name to VNG in 2008.

In 2014, VNG was valued by World Startup Report at US$1 billion, officially becoming Vietnam’s first unicorn. As the company has further consolidated and expanded business, its value has also increased accordingly, estimated at some US$1.5-1.7 billion by the end of 2020.

The next unicorn is VNLIFE. This startup, founded in March 2007 by Tran Tri Manh and Mai Thanh Binh, focused on electronic payment service. As a startup in the banking and financial service sector, according to CafeF, the company has later on introduced VNPay as a family e-wallet, which has become a big success.

VNPay has now become highly popular across the region, allowing users to make diverse payment services, from the settlement of utility bills and phone subscription fee to QR-based payments, serving 40 banks in Vietnam, 12 banks in Cambodia, and seven e-wallet service providers.

VNLIFE boasts the most far-reaching QR Pay network in Vietnam with around one million points of settlement. The company’s payment system now processes around US$1 billion worth of payment value each year.

In 2021, VNLIFE announced to have mobilized over US$250 million in Series B fundraising round, becoming the country’s second unicorn valued at over US$1 billion.

The e-payment service sector has also witnessed Momo as an e-wallet service startup reaching the unicorn status. Momo, established by M_Service, is known as a super application, allowing users to conduct payments or transactions via handheld devices with hundreds of different services covering all aspects of life.

Momo started to develop its e-payment ecosystem in 2007, and in 2010, Momo was introduced as a service partnership between Vinaphone and local banks, allowing Vinaphone subscribers to make payment or transfer money via their smartphones.

By March 2016, Momo had 2.5 million users, and owing to its popularity, Momo managed to mobilize US$28 million in Series B fundraising round, with major stakeholders being Goldman Sachs and Standard Chartered Private Equity.

MoMo to date has partnered with over 90% of banks in Vietnam alongside some 10,000 domestic traders, allowing the company to expand its market share to over 80% in the digital payment sector. As of 2022, Momo had recorded over 31 million users.

During the fundraising round Series E in 2021, Momo received some US$200 million of investment, while its value increased to over US$2 billion, becoming a new unicorn in the country.

The latest Vietnamese startup to be recognized as a unicorn is Sky Mavis, founded by Nguyen Thanh Trung in early 2018 with a focus on blockchain-based online games. The next month, in February 2018, Sky Mavis released the game Axie Infinity, which has become one of the most hit games built on blockchain. Axie Infinity has seen phenomenal popularity, having attracted up to 2.6 million gamers as of early 2021.

Sky Mavis is now building a blockchain ecosystem with diverse products and services, including e-wallet, non-fungible token marketplace, and Kanata decentralized exchange among others.

In October 2021, Sky Mavis in Series B round mobilized US$152 million, and official became a new unicorn with a value of US$3 bilion, according to Tuoi Tre. As such, Sky Mavis needed only three years and eight months to achieve the unicorn status, compared to 10 years for VNG and 13 years for VNLife.

As the startup movement is gaining steam alongside increasing investment into innovations, it is expected that Vietnam will see more unicorn startups in the coming years.
CafeF in an article on this trend has cited Forbes Vietnam to name several “near-unicorn” startups that are expected to accelerate in the coming time. These include Tiki as the third largest e-commerce platform in Vietnam, Giao hang Tiet Kiem as a fast-emerging delivery service company, Trusting Social as a big data and machine learning company that helps people with no credit records to access financial services, and Kyber Network providing a decentralized exchange that helps users to transact and convert cryptocurrencies.

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