The growing number of large startup companies in the U.S. and around the globe is reminding some industry executives of 1999 in the buildup to the spectacular burst of the Internet bubble.
But many do not see a bubble forming around unicorns quite yet.
While there are definite similarities between today's unicorn rampage and the exuberant investment in tech companies 16 years ago, there are important differences as well.
“Is it frothy? Yes. Are valuations high? Yes,” said T. Bondurant French, executive chairman of Chicago-based private equity firm Adams Street Partners LLC.
But, “my definition of a bubble is really a disconnect from reality, like the tulip bubble in the 1600s or the Internet bubble. This isn't that,” Mr. French said.
Unicorns are startup companies that are going after big markets, with the hopes of becoming big companies, and they can go global almost immediately, said Michael Kelly, managing director at Bala Cynwyd, Pa.-based money manager and consultant Hamilton Lane Advisors LLC.
It took 10 years for startup companies to go global in 1999, he said.
“It's less exciting to go public relative to the Internet bubble years, where there were fewer regulatory constraints around it,” Mr. Kelly said.
“What is truly different about these companies (unicorns) is the fact that they are going global faster with billions of users (customers), which is pretty unique, and they are reinvesting their profits. They have to be real businesses with lots of resources,” Mr. Kelly said.
Michael A. Rosen, principal and chief investment officer of Santa Monica, Calif.-based consulting firm Angeles Investment Advisors LLC agreed.
“It doesn't feel like 1999 when there were similarly highly valued companies but those companies didn't make any sense,” Mr. Rosen said. A lot of today's unicorns are quite viable, he said.
Whether their valuations are right is a different matter, he added.
