Next billion-dollar unicorns won't be from the US
Unicorns ... Everyone is hunting them. It's not just the usual suspects-the venture capitalists and private equity firms-but every investor class, including the 8 million accredited investors in the U.S. In their quest for funding, every new start-up needs to now allude to this mythical animal-the $1 billion start-up valuation-as a means to raise money.
But unicorns are very rare, and for investors the land of the unicorns can't continue to be fenced in by Silicon Valley. So where will the next herd of unicorns come from?
Here's a hint: As of April, 24 out of the 54 unicorn start-ups were founded by an immigrant, according to Dow Jones VentureSource. That's just under half of all of them. (Tweet this)
Historical data supports the globalization of the unicorn phenomenon.
In the United States, immigrants generally have a greater propensity to launch new high-tech businesses. This is a validated pattern, and there is extensive research and evidence around it.
Read More The top Latino entrepreneurs in the U.S.
Data from 2011 found that 46 percent of America's top venture-funded companies had at least one immigrant founder.
According to Vivek Wadhwa's research at Duke, an astonishing 25 percent of all engineering and technology companies established between 1995 and 2005 where founded by immigrants (an estimated 52 percent of all in Silicon Valley). That decade of immigrant success was responsible for wealth creation in excess of $52 billion and just under 450,000 jobs.
Creating a unicorn-like company from the ground up is a daunting task: Even if your product or service is highly desired by the masses or exponentially disruptive, the amount of work you need to put into it is overwhelming. It comes with huge trade-offs, personal commitments and sweat-real sweat.
Venture capital knows this very well. We like to say, "We bet on the jockey, not on the horse," which is absolutely crucial at the early stages of a start-up.
Immigrants are hard workers by definition. Many have been raised in challenging economies (or their parents did), constrained in resources and possibilities, trained throughout life to do more with less. They're self made, don't give anything for granted and strive to succeed every day. These are the exact qualities we look for in entrepreneurs, given the start-up world is a constrained environment with very limited resources, by its own nature.
The opposite situation is abundance and complacency, or corporate legacy, a greenfield for start-up disruption.
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Sequoia Capital is undoubtedly one of the most successful Venture Capital firms ever. A company formed by immigrants, it has Spartan rules and an attitude for perfectionism, backing up early stage companies and nurturing them to skyrocket in IPOs. Sequoia's children are the likes of Google (GOOGL), LinkedIn (LNKD), Cisco (CSCO), Yahoo (CSCO), Oracle (ORCL), Instagram (FB), PayPal and even Apple (AAPL). Their motto reads:
The majority of the entrepreneurs behind public tech giants in U.S. are first- or second-generation immigrants, but it's a broader corporate phenomenon: 7 out of the 10 most valuable and recognizable brands in the world were launched by immigrants or second-generation immigrants. These include not just Apple, Google and IBM (IBM) but AT&T (NYSE:T), General Electric (GE), McDonald's (MCD) and Marlboro.
Latin America's GDP will reach an estimated $15.14 trillion by 2025, rendering it one of the most important global markets in the world. Not only is it on track to become a leading destination for investments, but it is also likely to be an essential source of capital for global corporations.
Frost & Sullivan indicates a number of tendencies and developments. Latin America's middle class is growing, and urbanization is up. More and more Latin Americans are getting connected, and infrastructure spending is on the rise.
Latin America will have 1.3 billion connections by 2016, including mobile phones, tablets and other M2M (machine-to-machine) devices, with increased broadband penetration and 4G as major factors in the region's connectivity growth.
It's precisely in emerging markets with lower legacy barriers where disruption and more rapid adoption of new technologies happen. We have seen this move before, for well over a decade, where mobile technologies, wireless and smartphones were spreading faster than in mature countries as other access mechanisms were less of a barrier.
Start-ups are surging in South America, aiming at its 200-million-plus population. Start Up Peru, Start Up Chile, Incubar in Argentina, iNNpulsa in Colombia and Telefonica's cross-Atlantic Wayra accelerator are thriving.
Seeding investments in the region have multiplied from 2010 to 2014.
Telefonica's Wayra initiative alone has screened nearly 27,000 projects in less than 30 months of operation, with 438 start-ups receiving seeding investments from the Telco giant. Of those invested, another $74 million came additionally from third parties in average rounds exceeding half a million dollars per project.
Read More Miami's booming tech scene
Intel Capital, Axon Partners, Kaszek Ventures or Accel Partners are among the most active investors in the new promised land of unicorns, with investments gravitating to Brazil in a major part.
Despite the increasing activity from entrepreneurs and investments, many of these companies (and some unicorns with them) will end up migrating to the land of opportunity, North America, seeking to close more capital-intensive financing rounds beyond series A.
Venture capital as a resource to grow companies is much easier to find in North America-no debate. New start-ups and entrepreneurs are born with this in mind, and they start their journey to the north as early as in the early days of idea stage.
Immigrants come to the U.S. from East and South, with those in technology primarily from the East, so far. However, new kids are coming to town. With a 163 percent increase in population between 2010 and 2050, the U.S. Hispanic community will account for one-third of this country, according to U.S. Census data.
All of the above indicates that, in one way or another, we are poised to see new unicorns coming from the South.
-By Ed Fernandez, an early stage venture capitalist and a member of the CNBC-YPO Chief Executive Network
About YPO
CNBC and YPO (Young Presidents' Organization) have formed an exclusive editorial partnership consisting of regional Chief Executive Networks in the Americas, EMEA and Asia-Pacific. These Chief Executive Networks are made up of a sample of YPO's unrivaled global network of 20,000 top executives from 120 countries who are on the front lines of the economy. The opinions of Chief Executive Network members are solely their own and do not reflect the opinions of YPO as a whole or CNBC.
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