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The age of the startup unicorn may be coming to an end. Is the age of the centaur next?
Whereas tech unicorns are privately held companies valued by investors at $1billion or more, centaurs are companies that reach $100 million of annual recurring revenue (ARR) — as a new milestone.
This is a business metric that signals how much revenue a given company can expect from customers in a year and that can presumably serve as a more grounded benchmark by which to evaluate startups.
A decade ago, California venture investor Aileen Lee coined the term “unicorn” to describe private startups that reached a valuation of $1 billion.
The term caught on and became a major milestone and key marketing buzzword for startups.
But as the term worked to draw attention — and further funding — to companies that claimed unicorn status, more and more stretched to attain it.
With the booming market for public tech stocks, the main comparison point for the valuation of private startups, many startups were able to make it.
At this point, there are more than 1,000 private companies valued at $1 billion, according to data collected by CB Insights.
Some analysts say centaur status, as opposed to unicorn status, is much more “real,” because, at a stage where a company has $100 million in ARR, there’s product-market fit and usually thousands of customers.
According to Adam Fisher, of investment firm Bessemer Venture Partners (BVP), a company needs an average of about $29 million in ARR to achieve unicorn status, whereas a company with $100 million in ARR could potentially be ready to go public.
The centaur concept was the focus of a new BVP report published in 2022 titled “State of the Cloud 2022,” a deep dive into the cloud industry and the 150 global centaurs identified by the investment firm specifically in the sector.
Reaching unicorn status for a company was once a statistical rarity — hence the name — but is now a more frequent occurrence.
According to US research company CB Insights, the global unicorn herd numbered 1,068 as of March 2022.
Flutterwave a Nigerian fintech unicorn is pressing ahead with plans for an initial public offering (IPO).
Since its founding in 2016, Flutterwave has rapidly expanded and now has a presence in about 30 African countries. The CEO Olugbenga Agboola has led funding rounds, with one in January last year tripling the company’s valuation to $3 billion.
The term unicorn has “come to lack meaning,” Fisher said. “It’s much more compelling to say ‘we are a $100 million business.’ We’re confident that $100 million in ARR is a milestone that is recognized as a success. ”
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