Tech success story propels Edinburgh into the global 'unicorn' league
THE COVER OF the February 1st issue of Fortune magazine features a striking illustration of a unicorn wearing a hoodie, making it look like a technology geek.
The feature article – The Age of the Unicorns – refers to a description first coined by investor Aileen Lee in TechCrunch. She defined a ‘unicorn’ as a software company which is less that 10 years old that is now valued by its investors at at least a billion dollars. The term has stuck.
Unicorns are, of course, very rare beasts indeed. Lee’s original 2013 TechCrunch article reckons at that time around four such companies had been created each year, and they only represent 0.07% of start-ups.
So when Fortune magazine reported recently that FanDuel, was about to join the ‘unicorn’ club, it raised some eyebrows, particularly here in Scotland, where the company is based in the Quartermile area of Edinburgh. Insider readers will know FanDuel from the cover and Big Profile of last month’s issue of this magazine (http://bit.ly/1yG2eDL).
FanDuel has been an extraordinary success story. When I first met them in late 2007 in a room at Edinburgh University, they were operating their news prediction site HubDub. Although it seemed a bit weird, I was very impressed by the company’s founders and I decided to invest in the team.
Fortune now reports that FanDuel are in the middle of negotiating an investment of at least $100m at a valuation of at least $1bn. This report seems credible; the fantasy sports sector is growing at least 4 times annually, and rival DraftKings is also reported to be negotiating with the Walt Disney Company, owners of sports broadcaster ESPN, about an investment at a valuation over $1bn. FanDuel are currently estimated to have over 70 per cent of the market with DraftKings taking most of the rest.
These reports have encouraged their neighbours in the same building, SkyScanner, to declare that they are also worth a billion dollars. They might not technically be a ‘unicorn’ - they are 14 years old and the estimate of their worth is based on their growth since their last investment in 2013 which valued their company then at $800m. Still, it is quite extraordinary to have two billion-dollar internet businesses in the same building in Edinburgh.
Some speculate another ‘bubble’ is on the way but it is difficult to dispute the real achievements of these two companies.
Over 35 million people use SkyScanner every month and they booked £93m of revenue last year, up 42 per cent on the year before. They are the top flight comparison site in Europe.
Meanwhile Fanduel booked over $370m in entry fees in the last quarter of 2014, earning them revenues of $37m, a rise of 450 per cent on the previous year.
These are not ‘smoke and mirrors’ companies – they have solid revenue and strong growth.
This moves Edinburgh into a new league. Fortune found 83 unicorns worldwide, 55 of which are in the USA, 11 in China and three in India.
Nowhere else has more than two, including London - with music recognition app Shazam and mobile payment company Powa.
Silicon Valley, of course, reigns supreme as the natural home of unicorns, but this news puts Edinburgh firmly on the map.
Quartermile used to be the location of Edinburgh’s Royal Infirmary, including its maternity hospital. I was born there, as were both my children. These days the hospital has gone, instead nowadays they give birth to unicorns.