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One Myth You Can Believe In and Bank On

It would be silly to believe in unicorns, right? After all, they don’t even exist.

Unicorn Company

Source: shutterstock.com/LuckyStep

Or do they?

In one sense, unicorns are very real, and we are seeing more of them every day. In fact, they illustrate what I believe is the most important trend investors need to watching right now.

Let me show you exactly what I mean…

Myth Busting

Look up the word “unicorn” in the dictionary, and the first definition you’ll find is the mythical animal. Right below that is the second definition: something unusual, rare or unique.

Keep reading, and the third definition is where unicorns come to life… at least for investors: a start-up that is valued at one billion dollars or more.

Venture capitalist Aileen Lee gets the credit for coining that meaning of the word back in 2013,  when she wrote an article for TechCrunch titled “Welcome To The Unicorn Club: Learning From Billion-Dollar Startups.”

Start-up businesses used to seem as rare as… well… unicorns. But not anymore.

We as investors can indeed learn a very valuable lesson from startups and what’s happened since that 2013 article. In that year, there were only 39 start-ups that had reached the coveted one-billion-dollar status.

But last year in the U.S alone, a record 340 companies became unicorns! In fact, more businesses achieved billion-dollar valuations in 2021 than in the past five years combined.

A chart showing the number of years needed for different companies to reach a billion dollar market cap.

This astounding trend is a real-world example of exponential progress, which is the heart of my Technochasm thesis.

The Technochasm explains how technology is splitting the world (and stock market) in two, creating a deep chasm — or divide — between the best- and worst-performing stocks in the market. The destruction of seemingly strong, dominant businesses by innovative technology-focused upstarts is a story we now see over and over again.

Millions of employees, entrepreneurs, CEOs and investors are getting caught off guard. Those who don’t understand this rapid rate of technological change and adoption are doomed to fall behind as investors and business owners.

But for those who do understand, there’s a massive upside to the Technochasm.

Certain companies are growing faster than ever before, while others are going bankrupt in the blink of an eye. For every business that fades into oblivion, a new business takes its place and enriches its shareholders in far less time than at any other point in history.

One way to measure this phenomenon is to track the amount of time it takes a typical Fortune 500 companies to achieve that mythical one-billion-dollar unicorn valuation. It used to take a typical Fortune 500 company nearly 20 years to reach a market cap of $1 billion.

Now? It can happen in a couple of years… or even less.

A chart showing the number and total value of unicorn deals from 2014 to 2021.

Google’s parent company, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), reached a $1 billion valuation in roughly eight years. Meta Platforms (NASDAQ:FB), formerly known as Facebook, did it in four. Uber Technologies (NYSE:UBER) and Snap (NYSE:SNAP) both did it even faster.

The “unicorn phenomenon” perfectly illustrates how technology can create wealth at breakneck speeds.

More Important Now Than Ever

Investors should know and understand the emerging Technochasm in any market conditions, but especially right now amid all the confusion and chaos. The headwinds continue to blow — inflation, interest rates, war, Covid-19, falling stock prices and more.

Those headwinds can slow progress in a lot of ways and in a lot of areas, but they can’t stop innovation. 5G will continue to grow. So will electric vehicles, the need for next-generation batteries, cybersecurity and so much more.

Technology companies seem to take over more and more of the American economy every day, gobbling up market share, generating massive rivers of cash flow, and quickly scaling to $100 billion companies… even $1 trillion companies.

Technological progress is increasing at a rapid pace year after year, and companies that leverage this phenomenon stand to make record amounts of money with much less overhead and far fewer employees.

Here’s one great example: Internet payment company Stripe was founded in 2009 and has over 4,000 employees. Stripe is currently valued around $95 billion, so a quick calculation tells us that works out to more than $23.75 million per employee.

The Swiss company behind Ethereum (ETH-USD) only has an estimated 500 employees but is valued around $346 billion. That’s a staggering $689 million per employee.

I could show you example after example of this, but you get the point: Companies are increasingly harnessing technology to create enormous value while keeping their businesses lean.

It’s allowing investors to build wealth rapidly, regardless of what else may be going on in the overall stock market.

This was one of the major points Louis Navellier and I discussed in our special Tech Crisis 2022 event this past week. Louis and I have different styles of investing, but we feel strongly that some of the best wealth-building opportunities in the market today are in technologies that are transforming our world. I invite you to watch a replay of Tech Crisis 2022 here.

Investors who understand and embrace this new reality stand to potentially reap large investment gains for years to come.

Eric Fry
Editor, Smart Money

P.S. During the Tech Crisis 2022 event, Louis and I also give away two stock picks for capitalizing on the trends sweeping the markets right now. Details here.

On the date of publication, Eric Fry did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Eric Fry is an award-winning stock picker with numerous “10-bagger” calls — in good markets AND bad. How? By finding potent global megatrends… before they take off. In fact, Eric has recommended 41 different 1,000%+ stock market winners in his career. Plus, he beat 650 of the world’s most famous investors (including Bill Ackman and David Einhorn) in a contest. And today he’s revealing his next potential 1,000% winner for free, here.


Article printed from InvestorPlace Media, https://investorplace.com/smartmoney/2022/03/one-myth-you-can-believe-in-and-bank-on/.

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