Dovi Frances
9 min readOct 8, 2020

The Second Coming of Real Unicorns

By Roxane Googin, Chief Futurist, Group 11 and Dovi Frances, Founding Partner, Group 11.

“Surely some revelation is at hand;

Surely the Second Coming is at hand.

The Second Coming! Hardly are those words out

When a vast image out of Spiritus Mundi

Troubles my sight: somewhere in sands of the desert

A shape with lion body and the head of a man,

A gaze blank and pitiless as the sun,

Is moving its slow thighs, while all about it

Reel shadows of the indignant desert birds.

The darkness drops again; but now I know

That twenty centuries of stony sleep

Were vexed to nightmare by a rocking cradle,

And what rough beast, its hour come round at last,

Slouches towards Bethlehem to be born?”

W. B. Yeats, The Second Coming, 1919

A hidden pattern of defiance and resolve

If you have followed our Medium posts released during COVID, you will have seen an interesting pattern of defiance and resolve. We started releasing our pieces about COVID in early March where we essentially urged our peers not to fear this pandemic but rather maintain a long-term view. Since COVID, we have focused on what has seemed obvious — #1. Absenteeism is the opposite way of human progress and #2. Nothing will stop the progression of mankind and man-machine symbiosis.

Our Managing Partner, Dovi Frances, then shared some personal thoughts of what it feels like to actually contract and recover from COVID. Most recently, Group 11 shared what is arguably our most important piece to date — ‘Equities Gone Wild — Bubble or Beginning’ where we came full circle and essentially summarized all the factors that have led us to the next-gen technology adoption stampede we are currently witnessing.

Tooting our own uni-horn

Since June 2020, many of Group 11’s portfolio companies, in which we are a major investor and own a significant stake, have announced massive financing rounds. Subsequently, these companies have been newly inducted into the global unicorn club, or are to become unicorns in the near future.

Amongst these companies, Tipalti just announced a $150MM financing round at a >$2BN valuation, Next Insurance just announced a $250MM financing round at a >$2BN valuation, and TripActions announced a $125MM in Convertible-to-IPO financing only a few months after its $250MM financing round at a >$4BN valuation. A handful of Group 11’s up-and-coming companies such as SunBit, Papaya Global and HomeLight, have continued to attract investor money and are well on their way to joining Group 11’s stable. In under a year, our portfolio companies have attracted close to $1BN dollars of fresh capital that will allow them to grow market share even faster, attract and retain top talent, and further develop their tech offering.

Fresh capital is very important to have when you have perfect product-market fit. Lots of capital allows: Step 1: Disrupt. and now, Step 2: Dominate the market.

Group 11 now houses a stable of FinTech unicorns. We have significant exposure to the above-mentioned companies and now rank as a Top 1% performing fund. All of these milestones confirm our original mission to become the nation’s leading FinTech investor.

A perfect time for contemplation

Aristotle (384–322 BCE) once said, “The ultimate value of life depends upon awareness and the power of contemplation rather than upon mere survival.”

It has taken Group 11 about eight years since the launch of our Fund I, and six years since we started taking outside investor money, to get to where we are today.

Taking a moment to contemplate our current position, we ask ourselves fundamental questions about how we envision our own and our families’ future, and how we envision Group 11’s future and the future of tech. These are admittedly deep questions which we will address in another article. One question that we do wish to address today is around the definition, the title, and the substance of ‘a unicorn’.

Taming Wild Unicorns

A unicorn is a mythical creature that has been described and depicted in various ways starting around the 8th century BCE. From the ancient Greeks, to the European Middle Ages, to the European Renaissance, and all the way to our modern era — unicorns continue to hold place in popular culture, often used as a symbol of fantasy and rarity.

It’s no surprise that the term unicorn became popularized to designate privately held companies worth over $1BN. It is a fitting moniker. The unicorn term in the venture capital arena was first coined in 2013 by a venture capitalist named Aileen Lee who chose the mythical animal to represent the statistical rarity of such valuable and successful ventures. At the time there were only 39 companies that were considered unicorns.

Half a decade later, 2018 saw a big surge in the number of companies inducted into the unicorn list with over 120 companies being valued at or above $1BN dollars. This trend has further increased in 2019, and going into 2020, over 190 new companies joined this list which now boasts over 490 unicorns with a cumulative enterprise value of $1.5TN.

In other words, 63% of the companies on the unicorn list joined the list in the last two and a half years.

Damien Hirst, The Dream, 2008. Photo by Peter Macdiarmid/Getty Images.

This recent surge in the number of companies joining the unicorn list, coupled with the mania we are seeing in the public markets (with the rise of SPACs and the extremely generous multiples assigned to many of the IPOs taking place since May), naturally raises the question of whether or not we are seeing overvalued campines (and thus, ‘in a bubble’).

Our short answer is: NO.

We addressed this question in our most recent article where we concluded that:

A demographically-driven flat GDP outlook, coupled with unattractive bond yields and the prospect of vicious core industrial restructuring it implies, only adds to the demand for next-gen winners, explaining their recent rise. In the final stage where ‘software eats the world’, the only growth is digital disruption. In fact, There Is No Alternative (TINA) and investors have a Fear Of Missing Out (FOMO). We suspect that part of the rise in earnings (or now, revenue) multiples is simply due to the increased present value of future cash flows in a zero inflation environment.

However, we suspect another significant impact is also in play, that of a capital reallocation of bond money into select equities. Digital disruption vendors with strong track records and stable dividends become bond proxies in this new world.

The longer answer is that not all unicorns are created equal and there is more than one kind of unicorn out there.

Unicorns vs. Alicorns — Past and Present

Winged unicorns are referred to as Alicorns, (which is also a Latin word for the horn of a unicorn), They have often been depicted in art and literature as representing evil. It is also worth noting that Alicorns, (unicorn horns), were considered the most expensive gifts and reputable remedies during the Renaissance, given as diplomatic gifts, presented as royal objects, and used as universal antidotes. The enthusiasm and mystique surrounding the Alicorn died down when its true source was discovered. It was not in fact a magical and rare object, but really a narwhal horn.

W.B. Yeats wrote of imagining a winged beast that he associated with ecstatic destruction. The beast took the form of a winged unicorn in his 1907 play ‘The Unicorn from the Stars’ and later that of the rough beast slouching towards Bethlehem in his poem “The Second Coming” which is quoted above.

We find it opportune that Yaets wrote “The Second Coming” during the 1918–1919 Influenza pandemic, drawing a distinction between two opposing forces that fight furiously while the world is in disarray. How fitting to the world in 2020!

That is the case of Unicorns and Alicorns. Both are mythical creatures. Both appear somewhat similar. But upon taking a closer look, they could not be more different from one another. The Unicorn has been used to depict true rarity, innocence, and light whilst the Alicorn has been used for ages now to depict unrealistic beliefs, greed, and gluttony, thus propagating fraud, anarchy, and darkness.

Time is a flat circle and history tends to repeat itself not only in the way we reincarnate terms from the past but also in the way this reignites the same human tendencies that surrounded mythical creatures and stories.

Unicorn and narwhal side by side, from Michael Bernhard Valentini’s Museum Museorum (1704)

How to tell a true Unicorn from an Alicorn

The first step is to acknowledge that it is impossible that almost 500 unicorns are all indeed category-defining and worth their valuation outside their small list of investors. We will not go to scrutinize CB Insights unicorn list and the methodology used in compiling the list, but will simply acknowledge that some companies, (such as JetSmarter, MagicLeap to name a few) are not worthy of their private valuation for reasons that range from lack of real innovation, sheer mispricing by investors, to complete financial engineering.

They are fake unicorns. They are — Alicorns.

The second step is to read beyond the flashy headlines and ask a few fundamental questions about any alleged unicorn:

#1. Is it a next-gen business? We define a next-gen business model by three primary criteria; it is cloud-based, it uses AI to process vast data stores and provide intelligent service, and it leverages consumer internet self-serve user interfaces. These characteristics together feed off one another to absolutely obliterate legacy client-server technology-based alternatives that often rely on manual intervention.

#2. Is it scarce? Of equal importance is the fact that a successful next-gen attacker is rare. It is difficult and time-consuming to envision a new market, then develop the software and the corporate culture around that solution, and finally to attract users who feed that AI engine to the point it breaks from the pack. These maturation challenges, coupled with the fact the clock just moved up five years in a matter of weeks amidst COVID means alternatives to the existing leaders really don’t have time to develop.

#3. Is it continuing to take market share by restructuring the new environment in which it operates? This is not a simple TAM (Total Addressable Market) replacement exercise. The installed base of legacy client-server technology is vast and still powers the core infrastructure of enterprises in industries including banking and insurance, travel, retail, manufacturing, and energy production. A true unicorn fundamentally attacks the structure of these industries by delivering more agile, cost-effective, and customized alternatives. A fake unicorn, the alicorn uses these same next-gen technologies to deliver a look-alike product.

The simple truth often ignored by many of our peers in the VC industry is that new technology does not simply get added to an existing environment but rather, restructures it in its image thus opening many initially unforeseen doors. AAPL is not important because they are selling slick phone units but because they are transforming commerce as a result of selling phones. In the pressure-cooker of a post-COVID economy, it is the transformative offerings that will serve a redefined world.

#4. Who has invested in the company and are they reputable, long-term investors? Selection bias plays a big role here because essentially any deep-pocketed investor can turn almost any company into a unicorn. However, raising capital alone does not miraculously add long-term value. Quite the contrary actually — Hiding the problems of an alicorn running on a flawed business model under a pile of cash only hurts investors in the long term, while shepherding a real unicorn in support of working and tangible KPIs builds value over time.

(stable) Stable of Unicorns

In a world with a fundamental mismatch between legacy technologies and what consumers need, new solutions are filling the void while legacy enterprises slowly lose relevance and lose market share. As the world shifts under our feet, the best stability comes from creating the future, which is precisely what change-agent unicorns do.

We continuously ask the fundamental questions above as many of our portfolio companies continue to join the ranks of the unicorn list.

In Group 11’s growing stable of current (or soon to become) unicorns — Sunbit fills the void for consumer debt at the SMB point of sale. Similarly insurance companies are failing SMBs too, for the same reasons, Next Insurnce is filling that void. HomeLight is helping people buy houses in a more effective manner by completely disrupting a disjoined and manual process where AI and big-data were yet to be utilized. In the enterprise space, legacy complexity has led manual operations to be unacceptable in a post-COVID world, with TripActions, Tipalti, and Papaya Global serving once manual and human-intensive functions in accounting departments by similarly solving complexity problems with data, and then scaling out.

There is no doubt in our minds that many more new unicorns will emerge over the coming years as we expand the remit of digital automation beyond its current consumer and enterprise strongholds. However as we pass this initial step function of COVID-driven adoption , we also believe that the market will grow far more cautious, methodological, and thoughtful in pricing emerging vendors. After all, we are on the verge of man-machine symbiosis and certainly none of us wants to jeopardize the second coming of (now real) unicorns by diverting our energy to alicorns.



Dovi Frances

Dovi Frances is a financial services entrepreneur and founding partner of Group 11, a venture capital firm based in Los Angeles, California.