October 10, 2022

Becoming a 'unicorn nation' is a public policy fallacy

Unicorns are mistakenly seen as a panacea for growth and digital sovereignty by Macron's government

Cyrine Ben-Hafaïedh

For most European politicians supportive of entrepreneurship, becoming a startup nation also means becoming a unicorn nation. 

Nowhere is that more correct that in France. French president Emmanuel Macron has set the nation a goal of 100 unicorns by 2030 after reaching his original 25-unicorn goal three years early.

These goals and other pro-tech public policies all have two main beliefs in common. First, hypergrowth needs to be unconditionally supported given its positive impact. Second, that building large, successful tech companies is key for the region’s digital sovereignty. 


Politicians and policymakers risk making major mistakes if their only approach to supporting entrepreneurship and young businesses is to focus on the creation of startups worth over $1bn. 

Unicorns aren’t a national growth strategy — precisely because they are rare

Unicorns have an important impact on the economy as a source of direct and indirect jobs but also of innovation. They can lead ecosystems composed of startups and SMEs — similar to what China’s Alibaba has managed to build. 

But we can’t forget that unicorns are rare. Only 1.2% of European companies that raise a seed round go on to become a unicorn, according to Atomico and Dealroom analysis. That’s a one-in-100 shot. They cannot be presented as an aspirational model for all entrepreneurs and they cannot be the basis for building digital sovereignty.

Traditionally, startups prioritise growth — often hypergrowth like blitzscaling — to reach that elusive unicorn title. However, a growth-at-all-costs model is more often than not a fast track to failure. 

In a recent study of close to 40% of all European SMEs over an eight-year timespan, my coauthor and I found that firms across all sectors that initially prioritise profitability over growth are 2.5 times more likely to successfully secure high levels of both profitability and growth in the medium and longer term than those focusing primarily on growth.

Conversely, we find that companies focusing their initial strategy on growth are 2.6 times more likely to end up with poor performance in terms of both growth and profitability. This more than puts into perspective the unicorn model — and indeed the current market slowdown has also brought this reality into stark relief.

These unrealistic models of entrepreneurial success can induce a number of particularly harmful behaviours

In response to criticism of his focus on hypergrowth companies, Macron recently said that "French tech is obviously not just unicorns, but I see them in a way as examples, models for the whole ecosystem". Nonetheless, policymakers and the media still devote the vast majority of their resources to unicorns at the expense of what constitutes 99.99% of entrepreneurship — companies that are not unicorns and are not trying to become one. 

Furthermore, these unrealistic models of entrepreneurial success can induce a number of particularly harmful behaviours. The obsession with growth and the pressure from various stakeholders, financiers in particular, encourages irresponsible opportunism — just take the case of Theranos in the US.

Finally, due to the ambient diktat of growth, some companies have embarked, most often in spite of themselves, on growth strategies that are too ambitious and/or unsuited to their case. The successes that are highlighted in the media and flaunted by governments hide the forest of failures such as decommissioned or deceased unicorns which we hear little or nothing about.

Digital sovereignty

Digital sovereignty is the second main argument for the focus on unicorns and hypergrowth more generally. Digital sovereignty generally refers to the degree to which a country has control over core IT infrastructure and data used by the state, companies and individuals.  


A KPMG study on French startups' equity fundraising shows that foreign investors provided 66% of capital in rounds of at least €100m in 2021. 35% of rounds in France that year had at least one foreign investor. What this makes clear is that the French government has been investing in and facilitating the development of local startups which are then ultimately controlled by foreign firms. The same can be said for many other European countries. 

Moreover, if the goal is to reduce dependence on the technology of American tech giants like Google, strategically speaking, unicorns are not the place to look. 

Even if the unicorn is European, it will likely still rely on foreign infrastructure such as Amazon Web Services (AWS). France’s own policies are also contradictory, saying that American cloud offers can be considered as sovereign if they're sold through French joint ventures. Google thus partnered with Thales and Microsoft with Capgemini and Orange. There is no such thing as sovereignty in this case. 

The current market slowdown is bringing the hyperfocus on unicorns as a policy tool increasingly into question

Furthermore, France’s OVHCloud, the leading European cloud provider, is no competition for US tech despite recently establishing a new fire-fortified data centre in Strasbourg. Digital sovereignty requires another vehicle and billions of European funds to attempt to close the 10-year gap Europe’s digital infrastructure has with the US one. 

To date, the European efforts mainly amount to the Digital Markets Act (DMA), an attempt to regulate platforms and avoid certain unfair practices, adopted by the Council of the European Union in July, and the Gaia-X project. However, this promising project appears to have lost track of its initial goal of European digital sovereignty. Initially, non-European actors were supposed to be confined to the work groups and forbidden from entering the board. However, representatives of US tech giants currently sit on the association’s board, eg. the tech lobby DIGITALEUROPE.

The current market slowdown is bringing the hyperfocus on unicorns as a policy tool increasingly into question. We have strong evidence that sustainable growth and overall performance derive from prioritising profitability. Finally, digital sovereignty in Europe is not a unicorn affair, but a governmental one.

Of course, specific policies and support mechanisms are needed for unicorns and other high-growth companies but these are not relevant for most entrepreneurs who do not have such growth ambitions. We shouldn’t encourage growth at all costs — to thrive, ecosystems require SMEs, not just mythical creatures.