From Unicorns to Trillion-dollar Phenomena

As the name of this newsletter suggests, we are looking for the “next trillion” companies. There are only very few companies that have made it past the trillion-dollar mark. But once they do, they are not just companies - they are part of the human culture that is ingrained in how we operate in this world.

In other words, when things are measured on the scale of trillion-dollar, we believe they should NOT be viewed from the lens of corporations, but rather, they should be viewed as?collective human phenomena?that represent part of the human identity, as who we are and how we work.

Let’s look at the top 10 public companies of 2021, ranked by the?market cap:

Excluding Saudi Aramco, the rest of the trillion-dollar+ companies are all technology companies - Apple ($2 T), Microsoft (~$2T), Amazon ($1.5T), Alphabet (~$1.5T)1. These companies provide the infrastructure on how we live as modern human beings - from how we get the information to how we get toothbrushes.

But it doesn’t end there.

The soon-to-be trillion-dollar cos are all tech companies too: Facebook ($0.8T), Tencent (~$0.8T), Tesla ($0.6T), Alibaba ($0.6T), TSMC ($0.6T)2?- some are fulfilling the gaps that are left void by the $T+ cos, and some are representing the future where the humanity is going.

Facebook and Tencent combined ($1.6T) filled humans’ need to be connected and to be entertained. Alibaba fuels the world’s 2nd largest economy’s e-commerce engine. Tesla and TSMC combined ($1.2T) are strategically important for our society’s future direction in EV and Semi production.

Like we have discussed in?one of the past essays, oftentimes it's a lot easier to “predict” the long-term outcomes than the short-term ones. How do tech companies become so big in 2021 and what would happen 10 years from now?

To see the future, let’s rewind the clock. A mere decade ago, this is what the top 10 public company ranking3?look like:

Two things stand out:

1. The majority of those top 10 companies are Oil, Banking, and Retail; while Tech and Software companies were only the minority.
2. Even Exxon Mobil (Oil and Gas), the largest company at the time, was far from the trillion-dollar mark (even adjusted by inflation)4.

So what happened in the past 10 years?

Well, in one sentence, “software eats the world.” And to describe it more accurately,?the more software eats, the faster it eats5.

Over the past 10 years, not only we have seen Apple became the world’s most valuable company and Microsoft leaped from #5 to #3 with a strong foothold; we have also witnessed the “internet companies” (many of them survived and thrived from the dotcom bust) such as Amazon6, Alphabet, Facebook, Tencent, and Alibaba break into the top-10 chart.

However, unlike the traditional Oil and Gas companies which sell a?finite amount of commodity, the “internet companies” are selling and being fed by the?infinite amount of user data. By definition, their value tends to grow due to the simple “network effect”.

In a way, the internet companies are tightly associated with the overall human wealth creation, not by selling stuff, but by being an?invisible and scalable utility?that the world can not live without.

It has been a global society transition that took place right in front of our eyes.

Less than 10 years ago, Aileen Lee from Cowboy Ventures published the?famous report?that coined the term “unicorn” (i.e. $1B tech company), when there were only ~40?so-called ?? unicorn companies (because they were so rare, hence the name!)

Fast forward to now, we have 700+ tech unicorns globally. A?17X?increase in terms of count number7!

Not only the count number is bigger. The size of the tech unicorns is getting larger too.

It used to be once the tech company is minted with a “$1B unicorn” label, the new status would make the company better known and therefore attract better talents8.

Well, welcome to 2021 where the “deca-corn” ($10B+ tech companies) is the new “unicorn” (confusing, I know, but bear with me). Interestingly, we now have?~40?deca-corns globally, which is the same number of unicorns back in 2013.

Put it another way, in less than 10 years since 2013, we have 35 (private) companies that are now worth more than $10B and more than 600 companies that are being valued between $1B - $10B.

Collectively, the unicorns and deca-corns represent a?$2.4T?valuation9. Is it hard to imagine what is going to happen in the next 10 years?

This is no coincidence and it’s certainly could not be explained by market cycle or inflation.

Simply put, the world has been changing. It has been rapidly moving towards a more efficient operation and a more manageable way to interact internally and externally.

And?Tech just happened to be in the center of the very movement?over the past 20 years.

Given the rise of AI/ ML and intelligence software?value creation,?Tech will continue to be the axis for how the world operates over the next 20.

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1

Maybe a good idea to start naming your startup co with the letter “A”, no?

2

Maybe not a bad idea to start your company name with the letter “T” too. :~)

3

https://media.ft.com/cms/73f82726-385d-11e1-9f07-00144feabdc0.pdf

4

Back in 2011, who would have seen this coming to the most powerful corp in the world - https://www.bloomberg.com/news/articles/2021-05-26/tiny-exxon-investor-notches-climate-win-with-two-board-seats

5

“Network effect” is the heart of this “monster”

6

You have to admire the scale and the speed of what Amazon has achieved in mere 10 years. The power of Long term which we have written here - https://nexttrillion.substack.com/p/seeking-long-term-truth

7

https://www.cbinsights.com/research-unicorn-companies

8

Does anybody remember when Slack got its “controversial” unicorn status back in 2015? Now Slack Market cap is $26B. https://siliconangle.com/2015/04/16/slack-series-e-round-of-160m-confirmed-as-ceo-defends-unicorn-status/

9

I intentionally left out the crypto/blockchain space in the essay. Not because they are not important, they are. By the mere market cap number, the whole crypto space, in a mere 10 years, is already a $1.2T phenomenon. There is a good amount of dust that needs to be settled in the coming years and the topic is complex at the moment so we might do a separate post about this one day.