Welcome to the tech industry’s ‘decacorn’ era. Once rare and mythical, tech ‘unicorns’ valued at $1 billion USD are now a thing of the past and are quickly being replaced by startups that are now worth over $10 billion USD. With companies like Bytedance, Uber and Didi Chuxing leading the way, achieving this new ceiling is now more possible than ever. Let us take a closer look at this new type of tech startup–the ‘decacorn’.
What is a ‘Decacorn’?
Coined by Bloomberg, ‘decacorns’ refer to tech companies that are worth $10 billion USD or more. According to Digi-Capital, there were 38 unicorns in 2013, and 68 in 2014. Now there are around 327 unicorns in 2019, with around 20 that are classified as ‘decacorns’, according to CB insights.
In 2019, the top 10 decacorns include Bytedance, Uber, Didi Chuxing, WeWork, Lu.com, Airbnb, SpaceX, Palantir Technologies, Stripe and JUUL Labs. The decacorns exist within diverse industries such as digital media, eCommerce, ride-sharing, FinTech, big data, and others.
Where did Uber go? Why Uber gave up on Southeast Asia.
According to Techcrunch, some of the similarities between unicorns were that most companies had founders with technical degrees, were in their 30s or older, had prior tech experience, and those with more than two founders had also gone to school together. So, how does a company transcend from unicorn status to become a highly sought-after decacorn? Perhaps taking a look at two examples in Southeast Asia can shine some light on this new phenomenon.
Grab extends its reach
Founded in 2012, Grab started out as a ride-hailing service and has since evolved into a ‘Super App’, which offers services such as transport, food delivery, package delivery, payment, financial services, and video streaming. Serving millions of people across Southeast Asia, the Grab app and its services have become a market leader in the region.
One reason for the decacorn’s exponential growth is the huge gap in the market for their services. Grab sees that the Southeast Asian region has a huge potential for growth, with a $25 billion USD market for transport and $500 billion USD market for payments. According to the Jakarta Post, car ownership is also the lowest in the Southeast Asian region, with 70 cars per 1000 people, allowing Grab the opportunity to provide ride-hailing and transportation services in the market. In the next five years, FinTech services such as mobile payments will also increase as smartphone penetration is forecasted to double and non-cash payments have increased by 43.4 percent in 2015.
Grab has also caught the eye of investors like Temasek, Qunar, and Tiger Global to name a few. They just received a further USD1.5 billion in investment from Japanese global investor Softbank.
Thailand’s Central Group has also recently invested $200 million USD in the Thai subsidiary of Grab. The ability to raise funds is one of the factors that also contribute to the overall valuation of a decacorn.
Go-Jek goes places
On the other hand, Go-Jek is no stranger to competitive fundraising either, despite offering similar products in the same market. They recently closed a round of Series F funding in January 2019, worth a reported $1 billion USD led by existing investors such as Google, Tencent, and JD.com. Go-Jek will use the funds to expand its business in Southeast Asia with its entry into Singapore, Vietnam, and Thailand markets.
Go-Jek is also making moves to partner with relevant companies for their own ‘Super App’. They are linking up with partners such as DBS bank in Singapore for payment opportunities and Garuda Airlines for logistical support via Garuda’s fleet. Go-Jek is also planning a joint venture with Astra to use its fleet management system to help improve Go-Jek’s transport services.
Go-Jek’s ability to offer a suite of services has made it a household name in Indonesia. Besides transportation services, the ‘Super App’ provides grocery delivery services through Go-Mart, online payment service Go-Pay, Go-clean cleaning services, Go-Med prescription delivery services, and even Go-Pertamina that delivers fuel. Basically, if you need almost any kind of service delivered to you, the app has it all. Being able to offer such a wide range of services has led it to disruption and dominance of the delivery market in Indonesia.
Of course, there are also other factors that help to build a decacorn company, such as a focus on growth, the right positioning, and having a revenue-based model that will allow the company to turn a profit as soon as possible. The startups also need to be managed by people who have the right expertise in the business to be successful.
With a market size of 650 million people in Southeast Asia, both Grab and Go-Jek are looking to continue their expansion. We can expect to see further investments and subsequently the continued financial growth of both tech companies as they capitalise on this huge market. As of August 2018, investments of $4.22 billion USD have been poured into the region and will likely continue. These two tech companies can leverage the power of the growing tech ecosystem to compete as the top decacorns in the Southeast Asia region.