Unicorn companies, which value more than $1 billion are mostly originated from China. One-third of the world’s startups, which are 97 unicorns are successfully thriving in China despite the economic slowdown and trade war with the US, Hurun Research Institute said according to their research. However, China is still behind the US when it comes to producing hi-tech unicorns in artificial intelligence (AI), robotics, as well as biotech according to Credit Suisse, an investment banking company in their report, “Unicorns, Preparing to Gallop”.
Despite accounting for one-third of 326 unicorns around the globe, the startups in scientific research capability such as AI, big data, robotics, and software was only 14 percent. Meanwhile, it is 40 percent in the US.
China’s unicorn companies are more focused on business model innovation that takes advantage of the fast-growing consumer in the diverse and vibrant Asian countries. Meanwhile, the US continues to be driven more by the genuine high technology sector that dominates its unicorn companies.
The report broke down Chinese and US’ unicorn business into seven categories: Internet/e-commerce/O2O/Games which are focused on business model innovations and catering to consumer demands; AI/Big Data/Robotics/Software that serve companies more than the consumer; Fintech; traditional Old Economy business; Hardware/semiconductor manufacturers; Auto/Machinery; and Healthcare/Biotech.
53 percent of Chinese unicorns are on the Internet/e-commerce/O2O/Games sector, while the other countries are at 48 percent except for the US. In the US, the ratio is only 29 percent. InAmericathere’s a higher ratio of unicorns in AI/Big Data/Robotics/Software at 40 percent as opposed to 14 percent in China and 23 percent for the other countries. Meanwhile, China is at 4 percent for healthcare/biotech compared to America’s 9 percent and 5 percent for other countries.
US’ scientific research is more advanced than other countries that are still in the catch-up pace, but emerging markets like China and India have a consumer market that holds great potential and is growing really fast. The country’s stage development reflects on the characteristics of its unicorns aside from the size of the economy, and it is shown in the reported result.
Despite still lagging behind, China has always been trying to catch up. The country invests in research and development and attempts to develop the technology further to hopefully found more unicorns. However, this investment was only 1.2 percent of GDP from 2000-2009, which is below the OECD at 2.2 percent. By 2017, China invested 2.1 percent of GDP into research and development but this number is still lower than Japan, Sweden, Taiwan, Korea, Germany, Finland, and Israel, which are smaller economies yet are investing more in technology.
China’s unicorn is still dominant in the internet sector, predictably even in the upcoming years. There is a large room for China’s consumer market to grow, and there is still a lot to improve due to the inefficiency of traditional consumer services in the country. However, hopefully, due to the invested amount of GDP into R$D, hopefully the emergence of technology-based unicorns can emerge, instead of more business model focused ones. It is not impossible that the country will be able to catch up in the sectors of biotech and AI/Big Data in the future since China has a big advantage in large available data due to the significant amount of consumer activities online.