Sometime in August, my editor and I became interested in a question that turned out to be less controversial than expected: Will we ever see trillion-dollar startups?
I’ve now asked dozens of people this question and the answer, almost unanimously, has been some version of “Yes, look at OpenAI’s $500 billion valuation.”
It’s a remarkable state of affairs when you consider that as recently as August 2018, the planet’s most valuable startup was Uber, with a measly $76 billion valuation, and there were exactly zero public companies with trillion-dollar market caps.
Apple was the first to grab the trillion-dollar ring in August 2018 (on Tuesday, the iPhone maker’s market cap reached $4 trillion), and
Meta,
Nvidia,
Microsoft,
Alphabet, and
Tesla have since followed suit.
So, assuming a trillion-dollar privately-held startup really is just a matter of time, there are a number of questions that we probably need to start asking, including what it means for the exit-based VC model and for founders, what it means for public-company focused regulation and disclosure rules (especially given efforts to open retirement plans to private assets), and of course, what the heck do we even call these things?
Calling a company that large a startup is, of course, a bit of a misnomer, as Bessemer partner Talia Goldberg points out: “Calling a trillion dollar company a ‘startup’ is an exercise in branding,” she said via email. “It is a way for founders to keep the innovation narrative.” Goldberg also adds that the total valuation of the companies on Bessemer’s Cloud 100 list has grown by 10x over the last decade. Soon, she says, “the average private valuation will be $112 billion.”
It does beg the question: 12 years after Aileen Lee coined the term to describe billion-dollar companies, what does “unicorn” even mean anymore? $1 billion startups are a dime a dozen these days. What’s needed is a term for the most rarefied breed, which, if the Term Sheet readers I’ve talked to are right, will soon be measured in thirteen digits.
Samir Kumar, Touring Capital general partner, suggests the name “triceratops.”
“If you think of triceratops you think of an unstoppable creature and brute force,” Kumar said via email. “Kind of like how trillion-dollar valuation startups will be created. Triceratops also went extinct.”
Costonoa Ventures partner John Cowgill offers up “gigacorn,” while Felicis founder and managing partner Aydin Senkut likes “terracaps.”
“‘Terra’ for trillion,” Senkut said. “It’s the next logical jump after unicorns and decacorns. At that scale, ‘startup’ doesn’t cut it. A terracap isn’t really a startup. It’s a sovereign economy with a cap table.”
My personal submission, for anyone wondering, is dragon. But perhaps my favorite suggestion:
“At a trillion dollars, we’re going to have to call them Kaiju-corns!” Antonio Rodriguez, Matrix managing partner, said via email. “Because like the fabled monsters from the center of the Earth, they are big and strong and stomping all over the rest of the startup ecosystem.”
There is, of course, an exit challenge if and when we finally see these Kaiju-corns, likely bolstering incentives to stay private in perpetuity.
“If you’re investing in a startup worth a trillion dollars, what exit are you underwriting to? How is there any other exit besides going public?” wonders Touring’s Kumar. “And how many trillion-dollar startups will be able to put up the numbers to justify that valuation in the public markets? None of this is remotely close to being reasonable. Besides going public, probably the more realistic path is staying private (like SpaceX), and doing secondaries and tender offers to create liquidity for founders and early investors. That’s another very real path.”
The few hundred words I’ve dropped on this aside, Sunil Dhaliwal, Amplify Partners GP, makes an important point: Anything that gets that big is definitionally anomalous.
“We should give the unicorn metaphor a rest,” said Dhaliwal via email. “It served its purpose, but saying decacorn, centicorn, or kilocorn (is that what’s next?) has become meaningless. I’m not going to try to make fetch happen by coming up with a new catchy moniker. I think the bigger point is that while a few companies might reach this level, this is definitely not a category of companies anytime soon.”
Then again, investor enthusiasm for private companies, particularly of the AI variety, does not seem to be slowing down.
“The biggest delta we’ve ever seen now exists between private and public growth,” said Senkut via email. “The best private companies are growing at 400%, while the best publics struggle to hit 20%. Capital is going to go where the growth is. And right now, that’s private markets.”
Term Sheet Podcast… This week’s guest: Oura CEO Tom Hale! Oura has been making headlines for months, most recently with its massive $900 million funding round, valuing the wearables giant at $11 billion. In September, while at Brainstorm Tech, I sat down with Oura CEO Tom Hale to talk about the company’s growth, data privacy, the biggest challenge he’s faced as CEO, the unexpected places he’s unlocked consumer value, and more.
Listen and watch here.
See you tomorrow,
Allie Garfinkle
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