Why Fewer Colombian Startups Are Striving for Unicorn Status

Entrepreneurs were obsessed with large investment rounds and rapid growth for years before the startup segment received a cold shower of reality

A worker in a co-working space in London, August 2021.
September 12, 2022 | 04:30 PM

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Bogotá — Growth leveraged on large rounds of investment and debt to expand rapidly in various markets was until recently the most widespread and accepted formula to leverage the growth of startups, but this is beginning to change.

Behind the million-dollar investment rounds in the country today lie the difficulties of many entrepreneurs to meet the obligations acquired with their investors and grow at an accelerated pace while on the verge of being unsustainable.

While reaching unicorn status - companies valued at more than $1 billion - is still a significant milestone, the wave of layoffs, the new policies of investment funds and the burning of capital have motivated many startups to rethink their priorities in the face of a market that demands much more sustainability and numbers that are more tied to reality.

“We have begun to see that now startups are not only focused on the valuation of their initiatives, because, in the end, it is only about estimates and projections of how much they could sell their company for at some point,” Geiner Toro, manager of the finance portfolio at Ruta N, said an interview with Bloomberg Línea.


For the manager of the innovation and business center in Medellín, “the important thing becomes the result they will have with that company, measured for example with indices such as EBITDA or cash flows, and which give a quick view of how the core business and its profitability are doing”.

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For her part, Camila Salamanca, executive director of Endeavor Colombia, says that, “in recent months, there has been an adjustment in the market trend and investments by venture capital as a result of the global economic context”.

In her opinion, this has led these funds to prioritize their investments in companies with solid fundamentals and economic metrics that respond to a sustainable business model.


This obeys the “search for profitability, and not only that, in that they have a very accelerated growth with high valuations in order to be recognized as unicorns”, she says.

“The world of venture capital and startups has had a shakeup this year. Several assumptions changed, the industry’s accelerating growth curve slowed in several ways, and the logic of many industries changed. However, like every crisis, I believe that this one will also pass and will obviously leave some changes in the industry, but it will pass,” Felipe Santamaría, CEO of the Rockstart accelerator in Colombia, said on his social networks.

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Ruta N’s Toro believes that while becoming a unicorn had been the yearning of many startups, this mindset has changed in recent years.

“Many companies question whether reaching those valuation figures is a reflection of a company’s success, and even more so when the investment ecosystem considers that it is no longer so important to use valuations as a decision-making tool,” he said.


Colombia so far only has two companies in the unicorn club, home delivery platform Rappi and the proptech Habi, with the latter achieving that status in May of this year.

But after the golden days of rapid growth, the global macroeconomic context has brought a reality check, with high interest rates and the subsequent shift of strategy by central banks to adopt a tighter monetary policy., and which made venture capital funds refocus their strategy.

“Startups are rethinking their growth strategy, adjusting investment expectations and focusing on their main objective: survival,” Toro says.

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“To achieve this goal, many have reduced what is known as their burn rate, that is, what is ‘burned’ in their expenses when receiving investments and, rather, increasing their runaway, which is the time they have before becoming insolvent or without capital to operate,” he adds.

In an interview with Bloomberg Linea, Colombian serial entrepreneur Mauricio Hoyos, one of the investors in the Shark Thank program, questioned whether or not reaching unicorn status will continue to be relevant today.

“I don’t know if it is going to be so relevant to be a unicorn or not, I think that now it is starting to be much more important how much profitability you can generate and how fast you can return the money to investors,” he said.

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On this point, a recent report by the Latin American Venture Capital and Private Equity Association (LAVCA) indicates that “in turbulent times, venture capital funds are choosing to deploy more capital in experienced founders”.


According to LAVCA, in the first half of ishe year alone, founders who had already raised capital in the past raised 43% of the dollars raised by VC funds, a new record for Latin America.

The environment is more than challenging and a recent survey by financial data firm Preqin of more than 300 investors from different segments bears witness to this.

The report notes that 50% of investors expect a worse performance over the next 12 months for private equity, while 55% said it would be the same

“Private equity valuations are of most concern, with 80% of investors believing the asset class to be overvalued,” the report states.