Some Tech Startups Will Be Rabbits in 2016, Said Venture Capital Analyst

January 27
10:27 PM 2016

Unicorn startup is a term to categorize a handful of startup companies with more than $1 billion valuation. An analyst came up with a new term of "rabbit" startup, companies with real business and innovation.

Co-founder and CEO of CB Insight Anand Sanwal in his daily newsletter proclaim that 2016 will be the year of the rabbits. Sanwal believes the rabbits as a new group of technology startups that offer real business, real companies with interesting technology. He called it rabbit as an acronym of Real-Actual-Business-Building-Interesting-Tech.

Business Insider reported that there are so many people who do not like the term "unicorn" to define a group of technology companies with valuation over $1 bilion. Some people have concern that the unicorns may become unicorpse in 2016, the term given to dead unicorns.

According to New York Business Journal, the term unicorpses arose when CB Insight reported a severe decline of venture capital funding and deals in fourth quarter of 2015. The report, Global Venture Capital Report - Q4 2015 found that after a vigorous investment activity in third quarter, a dramatic cooling down happened in the fourth quarter. The report, a collaborative work between KPMG and CB Insight, saw venture-capital backed companies only raised $27.2 billion in 1,742 deals.

Sanwal argues that in 2016 rabbit startups will be separated from unicorns, that this year will not be the year of unicorpses. He wrote, "With 152 (unicorns), there will of course be some flameouts or those that run into issues. These are not riskless bets after all."

Tech columnist from San Jose Mercury News, Michelle Quinn also wrote that 2016 will be the year venture capitalists to sober up, as there will be five trends in venture capital to watch this year. The first trend is the continuous trend from last year, where venture firms invested less money and fewer deals to focus more on portfolio companies.

The second trend will be the viable business model will replace rapid growth, where unicorns will have to make decision to make a realistic business plan. Venture capital firms will emphasize more on efficiency as the trend number three. According to Kate Mitchell, a partner at Scale Venture Partners, "They will focus not on firms just growing at all costs but instead on smart growth."

Fourth trend will be the focus on innovation, such an mobile application in uncharted territories. Mike Kim, an associate with GP Bullhound technology investment bank gave illustration, "Nurses, construction workers and factory workers have antiquated technology but they all carry mobile phones for personal use. What if you could give them services that increase productivity?"

The last one will be the more focus of VC firms on demographics of partners and its portfolio companies.

Year 2016 will be an interesting year for venture capital firms and startup companies. Following last year's trend, firms become more discerning in selecting portfolio companies. While tech startups also had to focus on business and technology innovation, in ordert to separate rabbits from unicorns.

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