Dissecting Unicorn Startups: What makes a billion-dollar business?

Many investable entrepreneurs dream of becoming a ‘unicorn’. The term was first coined by venture capitalist Aileen Lee back in 2013. At that time, there were only 39 unicorn startups in existence. Today, there are more than 900 unicorn startups around the world.

What is a unicorn?

A unicorn is when a startup reaches a valuation of $1 billion. When it’s done well, it’s a Facebook, Google, or Airbnb. When it’s done badly, it turns into Unicorn Shit, like a WeWork or a Theranos. In other words, achieving unicorn-hood isn’t a solid gold guarantee of success. Still, it’s as close as any founder can hope to get (except for a couple of other unicorn species we’ll mention in a moment.)

From 39 unicorns in 2013 to 900+ unicorns in 2021… why have unicorns grown so fast?

The growth explosion of unicorns is attributable to several factors.

• The popularity of the Blitzscaling, or ‘Get Big Fast’ (GBF), strategy. This is when a startup tries to deter its rivals and gain a market share advantage through a focused combination of larger funding rounds and price cutting.
• Large companies focused on making acquisitions and buying out pre-existing technology and business models instead of investing in their own innovation.
• The increase in private capital investment.
• Not having to go through an Initial Public Offering (IPO) to obtain capital or higher valuation, which could potentially devalue the startup if the public market thinks the company is worth less than its investors do. A startup can avoid the IPO by simply going back to their investors and asking for more capital.
• The ongoing explosion in new and innovative technology that has allowed startups to upscale and expand faster than ever.

What are the most common traits of a unicorn?

Unicorns tend to be innovators: they bring something so new and exciting to the market that it immediately establishes them as a leader in their field. Just as importantly, they never stop innovating. As a result, a unicorn always stays several steps ahead of its competitors.