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Unicorn Startups are facing a Test of Truth

Today, 145 startups worldwide are valued at more than US$ 1 billion. And among these companies which earned the title of unicorn 12 are valued at more than US$ 10 billion(Fig.WSJ &DJVS). Uber ($ 51 billion), Airbnb ($25.5 billion), Snapchat ($ 16.6 billion), Flickpart ($ 15 billion) and Pinterest ($ 11 billion), to name a few. It is true that major investors have recently expressed concern that such valuations may lead to the bursting of another financial bubble. Are these valuations disconnected from economic fundamentals? Many experts at the World economic Forum in Davos felt that only 30 unicorns are likely to survive over a 12 years horizon. The people who are sounding alarm make 2 observations which appear almost obvious. First, a number of startups rely on innovative Web service applications which can be readily replicated and most likely be improved by competitors. Secondly, extremely low interest rates and abundant liquidity have encouraged many investors to put their money in businesses of uneven quality. It seems that the mythical one-horned horse could come back down to earth. There may be early warning signs: rounds of financing become more difficult to implement and investors always require stronger guarantees. And of course, extremely high valuations achieved in private are not always maintained when the companies go public. Yet the reality is that, at some point, even if a business model seems highly innovative it must be demonstrated that it can be profitable at least in the medium term. However, an despite increasing doubts over the viability of some businesses, we don't know if we are in a bubble. And unfortunately, the existence of bubbles is impossible to prove until they burst.

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