As we pointed out in our previous blog post, media coverage can be seen as a valid indicator of a market’s economic potential. In this post, we want to share some insights on the relation between the valuation of startups and their coverage in tech media.
For this research, we focused on companies on the CB Insights Unicorn List. CB Insights defines a unicorn as a private company valued at $1 billion and above. The term unicorn as a definition for billion-dollar startups was first used by Aileen Lee from Cowboy Ventures in a Techcrunch article in 2013 and it has become pretty popular over the last two years. 2015 was the year of the unicorns as more than 50% of all companies (73 of 144) on CB Insights Unicorn List joined that list.
To quantify the public attention of these highest-rated private companies, we analyzed their coverage in the world’s leading tech media. We only watched the 119 companies from the Unicorn List that are textually unique (e.g. not Uptake) and analyzed more than 1 million articles in total.
Comparing the latest valuation and the media attention in 2015 showed a clear correlation between these two factors. This means that tech media cover a company more the higher its value. But the scatter plot also reveals that many companies get more (e.g. Credit Karma, Buzzfeed), or less (e.g. Palantir, Lufax), attention than their valuation would suggest. To better understand which kind of startups get a particularly large amount of attention, we calculated an index of media attention and valuation. If this Attention/Valuation Index is above 100, the startup received above-average attention in 2015 in comparison to its valuation.
Startups that joined the Unicorn Club in 2015 received above-average attention in the same year. This interdependency was to be expected as the funding event itself is relevant news. Analyzing the Attention/Valuation Index for startups from different regions revealed that European unicorns received the highest attention in the top tech media sources measured on their valuation. This was quite surprising to us as most of the leading tech media sources are based in the United States. Asian startups on the other hand got significantly less attention than Western startups. Three (Xiaomi, Flipkart, Didi Kuaidi) of the 10 most valued companies are based in Asia, but none of them are in the top 10 of media attention. Looking at the industries shows that e-commerce/marketplaces and fintech startups received particularly strong media attention in 2015. On the other hand, big data und healthcare startups like Palantir or Intarcia were hardly noticed.
The two food delivery startups Delivery Hero and Blue Apron, were the top outliers regarding the Attention/Valuation Index. This is because media loves growing and very competitive (“Food Delivery Wars”) markets. Credit Karma (Fintech) and the only AR-Unicorn Magic Leap also stood in the spotlight.
This quick analysis showed us two things. First, media attention is an interesting indicator when evaluating companies as it correlates with the value of a startup. Second, the data also reveals that the economic value of a company is only ONE criteria for media to cover it. Analysts should always monitor a wide range of sources and focus on hard facts to minimize the media bias effect when evaluating companies and markets.
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