In a post on May 16, VC firm Lightspeed Venture Partners kicked off by saying, “The boom times of the last decade are unambiguously over.”
But some startups don’t mind. We ranked 100 companies for their unicorn potential and polled them on the downturn. Most (56%) said they didn't expect it to have much impact on their growth in the next few years.
Perhaps it comes down to strong fundamentals, or simply that these high-value, high-momentum companies are filling much-needed voids in the market. Yet we can’t help notice that on closer inspection, many soonicorns have even benefited from the gloomy forecast.
Otrium: a company riding the silver lining
Otrium — ranked second on our list of likely unicorns — is a prime example. It was doing extremely well before the global cost of living crisis took hold, and now it’s doing even better. The Dutch ecommerce company, which helps fashion labels shift unsold, end-of-season stock at cheaper prices, finds itself in big demand as customers cut back on purchases.
Otrium’s cofounder and co-CEO, Milan Daniels, says the company is helping some 400 labels “navigate the difficult environment”. It has been an especially challenging few years for the fashion world, with the pandemic forcing stores to close, resulting in higher-than-usual levels of unsold inventory.
Daniels is calm about the future. Otrium raised roughly $120m last year and he says he follows the news of layoffs, tech bubbles bursting and markets dipping, but hasn’t seen anything to get him overly excited.
“Just like you could easily get carried away last year with over-hype in the market, you can now get carried away with gloominess" he says. "If you build a valuable business focused on a fundamental problem, there’s more than enough there to carry on with optimism.”
The Covid effect that keeps on giving
The pandemic’s reshaping of the economy raised the profile and accelerated the valuations of many companies on our soonicorn ranking. For example, Covid lit a fire under the sales of software of all kinds as more people began to work, shop and communicate through digital channels. The pandemic also accelerated growth in cybercrime: online security is a sizeable category in the ranking with 10 entries.
The pandemic is — hopefully — winding down, but some companies are gracefully continuing their covid-fuelled ascent, seemingly unhindered by current economic threats.
Take, for example, remote medical company Proximie (#78 in the ranking). It provides augmented reality underpinned training to surgeons and raised an $80m Series C round in June. “The impact of the Covid pandemic in England alone means 6m people are on the surgical waiting list with 1m surgical training hours lost during the pandemic,” says NHS surgeon and Proximie founder Nadine Hachach-Haram.
Workplace 2.0 keeps spurring enterprise software
Anyone chasing European unicorns will know that enterprise technology and fintech make up the lion’s share of the continent’s billion-dollar companies, and our final soonicorns ranking reflects that. Remote/hybrid and flexible work models — likely here for the long haul — only serve to reinforce the sector’s importance and growth.
Included in this rise are several creative tool companies. And, when you think about it, it’s not surprising. In our personal lives it’s easy to create and post content, but most of us dread visually creative tasks in the workplace. (We see you, PowerPoint.)
Good luck prying these helpful tools from the hands of those behind the dashboards
Several startups on the ranking — Pitch (#1), Synthesia (#5), PlayPlay (#26), Veed.io (#31) and Linearity (#90) — are trying to ease the pain by making presentation and video design work prettier, easier and more efficient. For any founder hoping to spice up their pitch deck, there are worse places to turn.
Perhaps the demand for more creative corporate tools was inevitable. And when economic forces shake markets, content will still be king. Good luck prying these helpful tools from the hands of those behind the dashboards.
Billie: a BNPL model ready for tumultuous times?
Another downturn-defying example is Billie, ranked #12 on our list. It's a B2B buy now, pay later (BNPL) fintech, designed as a short-term financing tool to help ecommerce companies manage their cash flow. Last year it raised $100m, bumping its valuation up to $640m — and notably partnered with Klarna to handle the B2C BNPL giant’s business lending ambitions.
Like many other business areas, the BNPL model is sure to be tested as the European economy faces a possible recession. Already Klarna, the biggest BNPL operator, has laid off 10% of its staff, with revenue likely to falter as consumers curb spending. But the company’s cofounder and managing director, Christian Grobe isn’t fussed. He insists BNPL risks “are much more limited” in the B2B world. Loaned amounts are small, for starters.
Nevertheless, Grobe is clearly relieved the company raised last October. “[At Billie] we’re pretty much relaxed as we have a long enough runway," he says.
“The two years ahead have the potential to become very, very nasty. We should all be prepared for the much bigger storm to come over the next 24 months.”
His advice for would-be founders, as they confront the end of the long tech boom? “Be brave, if you think you have an opportunity and no-one has done it before, you need to do it. Sometimes it took us up to half a year to make decisions. In the end, you just have to do it. Don’t overthink, just do.”
Want more soonicorn insights? Europe’s rising 100: the ultimate B2B list is a 2022 report from Sifted Intelligence, sponsored by Sapphire, listing 100 high-flying business-to-business companies that could someday join the ranks of Europe's $1bn-plus startups.