Unicorn Company

What Is A Unicorn Company? A Comprehensive Guide For 2022

Elena Hudgens
By Elena Hudgens 15 Min Read

The phrase “unicorn company” is applied to a privately held startup that evaluates more than one billion dollars in the venture capital industry. The term was coined by Aileen Lee, the founder of Cowboy Ventures, a seed-stage startup capital firm based in Palo Alto, California.

Unicorns are also used to describe a phenomenon in the human resources (HR) industry.

HR managers may have high expectations for filling a position, causing them to seek individuals with better qualifications than are required for the job. 

In essence, these managers are on the lookout for a unicorn, resulting in a mismatch between their ideal candidate and who they can hire from the pool of candidates available.

“Welcome to the Unicorn Club: Learning from Billion-Dollar Startups,” by Aileen Lee, was the first article about unicorns in the venture capital market. She studied software businesses launched in the 2000s and discovered that only 0.07 percent of them ever reached a $1 billion value. 

She remarked that startups that raised $1 billion are as unusual as unicorn companies.

The first unicorns, according to Lee, were created in the 1990s. 

She pointed out that Alphabet (GOOG)—then Google—was the group’s unambiguous super-unicorn, with a valuation of more than $100 billion. In the 2000s, many unicorns were born, but Meta (FB), formerly Facebook, was the decade’s lone super-unicorn.

Unicorn Companies Valuation

Source

Unicorn company worth is determined by how investors and venture capitalists believe companies will grow and evolve; therefore, it comes down to long-term forecasting. Many of these businesses rarely make any money when they first start. 

This means that their valuations have no bearing on their financial performance.

However, investors and capitalists may face some difficulties. There may be no alternative business model to compare the startup to if there are no other competitors in the industry, making the task more challenging.

Factors of a unicorn company

Being a unicorn company is not easy; we each have our own unique story. What makes it more complicated is that there’s no single answer to what traits will make you prosper and how different unicorns thrive in different environments. 

We’ve compiled a list of common points that can be found on all unicorns:

1. Disruptive innovation

Almost all unicorns have disrupted their respective fields. For example, Uber revolutionized the way people commuted. Airbnb impacted the way people booked their vacations, and Snapchat disrupted social media usage, among other things.

2. The ‘firsts’

Unicorns are frequently seen as pioneers in their fields. They alter people’s behavior and gradually establish themselves as a need. They are also considered to continue innovating to remain ahead of potential competitors.

3. High on technology

Another common theme among unicorns is that their business models are based on technology. Uber and Airbnb were able to gain acceptance for their business models by producing user-friendly apps. Uber is a cab service company that uses an app, and Airbnb allows people who have properties around the world to rent them out using Web technology.

According to recent research, the software makes up 87 percent of unicorn products, hardware makes up 7%, and other products and services make up the remaining 6%.

4. Consumer-centric

62 percent of unicorns are B2C businesses. Their goal is to make things simple for customers and become a part of their daily lives. Another significant feature of these firms is that they keep things affordable. Spotify, for example, has made music listening more accessible to people all around the world.

Most unicorns are privately held, which increases their value when a giant corporation invests in them.

Unicorns Companies: What Kind Are They?

Unicorn companies, such as Deckard’s unicorn, produce rivers of ink. Entrepreneurs question what it takes to succeed on such a vast scale, but laying down a road map for developing a unicorn company is difficult. 

Many factors have a role in a startup’s success or failure; however, in the lack of magical formulae, a set of common points can be provided:

Unicorn company uses Facebook, Twitter, Instagram, and other social media platforms to help spread its message. This is how segmentation; can magnify their message and impact their target demographic for a far lesser expenditure than, say, television.

Always putting the customer first: they follow a customer-centric business strategy. In other words, they think about the consumer before (ideation), during (production), and after (delivery) (after-sales). 

The importance of the user experience cannot be overstated. Once upon a time, only the product was important. The buying experience is now just as crucial, if not more so.

Global and rapid expansion: successful businesses start with a global mindset and a get big fast plan to, as the name implies, get big as soon as feasible. To achieve these goals, you must go all out for internationalization and have a scalable model.

They are multidisciplinary and multi-cultural organizations with diverse teams. As a result, they benefit from a diverse range of professional backgrounds, which is one of their strengths in developing revolutionary ideas. Furthermore, they are youthful businesses with excellent skills and innovation.

Uncertainty is a daily occurrence: the distinction between success and failure is razor-thin. Because these companies are well aware of this, they learn to accept the good with the bad and create a unique resilience.

Examples of Unicorn company 

Unicorns aren’t only mythical creatures; they’re frequently mentioned in popular business and finance debates. Uber, Airbnb, SpaceX, Palantir Technologies, WeWork, and Pinterest are some of the most well-known unicorns in the United States. 

Didi Chuxing, Xiaomi, China Internet Plus Holding (Meituan Dianping), and Lu.com are just a few of China’s unicorns. As of June 2020, there are over 600 unicorns on the planet. They have raised a total of $442 billion and are valued at roughly $2 trillion. 

Nuro

Source: pandaily

Nuro, an autonomous vehicle delivery firm formed by two engineers from Google’s self-driving car project Waymo, is one of the hottest unicorn startups. Nuro, founded in 2016, became a unicorn company after getting a $940 million investment from SoftBank Group.

Nuro, founded in 2016, became a unicorn company after getting a $940 million investment from SoftBank Group, valuing it at $2.7 billion.

Nuro has carved a niche for itself in the autonomous vehicle business by concentrating on zero-emission local delivery cars. Nuro has evolved and acquired several firms since then, notably Ike Robotics. 

The company is now testing a few pilots, including its R1 and R2 generation of cars, delivering medical supplies and groceries in Fry’s Food and Drug and Kroger shops in California. Nuro was valued at $5 billion in November 2020.

Instacart

Source: futurestartup

Instacart is a grocery delivery app with over $2.7 billion in funding and serves over 500,000 items from local stores, including Whole Foods, Safeway Jewel-Osco, Costco Harris Teeter. As of June 2020, the company had an astounding valuation of 13.7 billion dollars with its most recent 225 million dollar investment led by DST Global General Catalyst.”

The Most Expensive Unicorn Companies 

Unicorns are extremely rare and difficult to come by. With these types of businesses, something similar occurs. According to CB Insights data from January 2019, there were just 310 in the entire world.

Breaking down the world’s biggest startups by industry, it is clear that there are a lot of tech-related fields. More than 77% of unicorns valued above $10 billion fall into this category, largely in financial and commerce software. The ten most highly appreciated are listed below:

  • Toutiao – Bytedance (China) is a news portal that allows users to customize their content.
  • Uber is a mobile taxi service in the United States.
  • Didi Chuxing is a vehicle rental firm based in China.
  • WeWork is a job-sharing firm based in the United States.
  • Airbnb (United States) is a platform for holiday and tourist lodging.
  • SpaceX is a private aerospace transportation firm based in the United States.
  • Palantir Technologies (USA) specializes in extensive data analysis.
  • Stripe is a startup based in the United States that enables people and businesses to accept online payments.
  • JUUL Labs is an electronic cigarette firm based in the United States.
  • Epic Games is a video game studio based in the United States. Take, for example, Fortnite.

All the above-listed companies are the most expensive unicorn companies, for guidance for your company, you can surely look up to these companies.

There are many unicorns in non-tech fields. Some, like Indonesia’s J&T Express logistics and package delivery company that still uses automated sorting in its warehouses, aren’t directly involved with technology.

It is one of the few startups to come from somewhere other than the US or China at this point which together accounts for over 70% of all 35 biggest startups. The UK (3) was next highest on the list while Australia, Brazil, Germany India, and Sweden each had one such unicorn on it as well 

With constantly fluctuating valuations and technological breakthroughs always around the corner; who knows where we’ll find a $10 billion unicorn next?

What Is the Best Way to Invest in a Unicorn?

Unicorns, like fledgling companies, don’t accept a lot of moderately-sized investments unless you’re a private investor or venture capitalist. However, investors should watch their progress if these unicorns decide to become public firms and IPO.

The ideal market value scale for launching a firm is thought to be $1 billion. Such a market ensures a sufficient number of clients while allowing for a new business entry.

As a result, it’s critical to make sure your product has the potential to be influential in the Unicorn market.

The purpose of market research is to ensure that your product has a market or fits into a crowded market. It would be beneficial to ensure that it is appealing enough to entice them to spend a higher price frequently.

As a result, there are specific empirical-based standards for unicorn-level initiatives. The dynamic of startup growth is fueled by the combination of the founder’s skills, not by a single framework:

If a company grows tenfold in three years, it can be valued at a billion dollars.

A founder must be fixated on results. As every famous unicorn does, the trick is to do whatever it takes – make new rules and break the old ones.

Continue doing unicorn-related activities until they no longer work. Continue doing what you’re doing if your customers like it. It would be advantageous if you could additionally make certain that as your firm grows.

Repeat the process for a larger target audience, keeping in mind the hypothesis that worked effectively for your smaller audience.

To maximize unicorn valuations, the best option is to choose between unicorns worth $2 billion and $5 billion. That’s the winner zone. The good news? Secondary market access for unicorn equity has been booming- it reached a volume of $55.4 B in Q1-Q2 2019!

The bad news? It’s hard for outsiders to participate in this because there are many rules shrouded in mystery that can only be obtained from VC firms or innovators who reside within Silicon Valley itself; just as investors compete with each other over-promising unicorns, so do these very same unicorns companies compete amongst themselves when it comes to prestigious venture capitalists (VC). Branding also matters on both ends of the spectrum.

Outsiders need inside knowledge and relationships that are only obtained through experience within a community. Brokers can be risky because they profit from transaction fees, not their clients’ profits.

However, some funds are managed by reputable private equity firms, who provide such insight along with built-in diversification when it comes to the risks of any given investment.

Wrapping Up

The term “unicorn” has evolved from mythological to common in business and finance talks. Unicorn enterprises have gained notoriety and carved out a niche in the market. Not every unicorn will turn out to be a successful startup. The point is that after a startup reaches a particular milestone, it must continue to work hard.

I hope this article provides you with connecting the dots so you may carry out all of your plans!

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Posted by Elena Hudgens
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Elena Hudgens is an entrepreneur with 10+ years of experience. She started her journey by building her own e-commerce website on Shopify and turned her $1000 savings to millions in just 2 years. Soon she started different ventures in which she failed and succeeded. And now, she's on a mission to help other entrepreneurs with her life and business lessons.
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