Last week Ecovadis announced its acquisition of Ulula, a human rights analytics platform. Ecovadis is an admirable company, one of France’s pioneering startups in sustainability analytics solutions, and now rapidly emerging as the gold standard for business ESG ratings.
Ecovadis is also one of France’s 40+ tech unicorns.
The purchase of Ulula represents Ecovadis’ second acquisition in as many years, having previously acquired Ecotrek, a sustainability data mining startup, in 2022.
I’m often asked by officials in Tokyo, marveling at how the French ecosystem produced nearly 8x as many tech unicorns as Japan did, all the while in a country half its size, what Japan needs to do to ramp up its unicorn creation.
My short answer to this question is that Japan still lacks two essential ingredients:
- an abundant pool of seed stage startups
- a positive culture of M&A for startups
Seed stage startups
I’ve written before about the importance of viewing unicorn cultivation as a funnel. There is a direct connection between the quantity of seed stage startups in an ecosystem and the output of unicorns. In France’s case, approximately 1,000 seed stage startups are necessary to produce one unicorn. Failing to foster a sufficiently large volume of seed stage startups fundamentally tightens the reins on unicorn growth.
Moreover, M&A
With this second acquisition, Ecovadis also finds itself in the vast majority of French unicorns. Over 70% of the unicorns in France have made multiple acquisitions of other startups along their journey to becoming unicorns. Bringing other startups into the fold can help an aspiring unicorn broaden its business model, enlarge its product line, reinforce its management team, access new markets, recruit more innovative minds, and often a combination of the above.
For better or for worse, the unicorn count is a metric that governments around the world like to use as a proxy for the vibrancy of their domestic startup ecosystems. I submit that Japan can learn a lot from the French case study of unicorn production.
