In February of this year, Dealroom published a report on the performance of the Lithuanian start-up ecosystem in 2022. We see continued growth in the ecosystem, significant changes in legislation, and we now have a third unicorn – Baltic Classifieds Group. However, the reaction to this latest news is wildly divided, and so the question arises: why?
My first concern is always to understand the concepts – are we talking about the same thing? Wikipedia defines a unicorn as a startup valued at USD 1 billion. “Dealroom further clarifies that it is not only a current startup, but also a former startup that at one point reached USD 1 billion. It shall also include a single startup that has reached a valuation of USD 1.5 billion at the same time as it has reached a valuation of USD 1 billion or an exit. This is probably what most people understand – it doesn’t matter when you reach a valuation of that amount; all that matters is that you are or were a startup when the valuation was made.
And this is where it gets even more interesting. “Dealroom describes a startup as a company designed to grow rapidly. The same criterion – high growth potential – is also mentioned by other sources (e.g. Forbes or Wikipedia), alongside additional attributes. If we refer to Lithuanian law (as we normally should), we see that a startup is a micro or small enterprise with high potential for innovation-based business development (i.e. up to 49 employees, with annual revenues up to EUR 10 million and/or assets up to EUR 10 million) that has been registered in the Register of Legal Entities for no longer than 5 years. This is what the Law on the Development of Small and Medium-sized Enterprises provides for. Most of the attributes are subjective – e.g. what is high or low development potential, what is innovation? Meanwhile, no one can dispute objective, measurable indicators, such as the dates of establishment and becoming a unicorn. Thus, if we were to assess the criteria for a startup under Lithuanian law, the whole debate could easily be concluded by looking at the year of establishment and the time of becoming a unicorn. The statistics would show that Estonia has not ten, but at best four unicorns, Latvia has one, and unfortunately, Lithuania has none. But do we really think so?
Another question about the concept of a unicorn is when one gains the title and when one loses it. In the public domain, there are assessments that Baltic Classifieds Group was named a unicorn too late, when it no longer even met the criteria. But does it really matter if the EUR 1 billion is not spent on the market? Is it really important if the valuation of USD 1 billion was achieved after the IPO? After all, this value is due to the company’s activities up to that point, not just to the fact of the IPO. Legislation will not even help in this case because the concept of a unicorn simply does not exist, and it does not need to.