Contents
- Definition of a Unicorn Company
- How Unicorn Companies Emerge
- Why Companies Strive to Become Unicorns
- Example of a Unicorn Company
Definition of a Unicorn Company
A unicorn company is a private enterprise valued at over one billion dollars. These companies typically exist for no more than ten years, and at least three-quarters of the shares are owned by their founders. Unlike public companies, the shares of unicorns have not yet been listed on the stock exchange, limiting their funding opportunities. However, this also means that they have less accountability to shareholders. When a company goes public, it ceases to be a unicorn and becomes a more mature business.
The term "unicorn" was introduced by Aileen Lee, founder of the venture capital fund Cowboy Ventures, in 2013. She used the term to refer to young yet successful startups that are as rare as the mythical creature—the unicorn. Currently, there are over 1000 unicorn companies worldwide, although the exact number varies by source. For instance, Crunchbase counts 1460 unicorns, while Techstartups lists 1207. The largest number of such companies emerged in 2021-2022.
How Unicorn Companies Emerge
Any startup can become a unicorn if it successfully develops its offering. Typically, such companies start with a small team focused on creating innovative solutions in their field. A notable example is Uber, which became successful by implementing a unique service that allows users to quickly and conveniently summon a taxi.
Over time, startups begin to attract funding from venture capitalists. This occurs when the product starts gaining popularity and generating revenue. For example, Telegram, the social network founded by Pavel Durov, was initially funded by the founder himself, and in 2018, several major investors, including Roman Abramovich, invested in the project. After this, companies aim for scaling by entering new markets and expanding their audience. If at this point or earlier the company's valuation exceeds one billion dollars, it earns unicorn status.
Some companies remain within this valuation, and their worth may fluctuate. They may temporarily leave the unicorn lists but can return under favorable circumstances. When a company attracts additional funding through an IPO (initial public offering), it loses its unicorn status as it becomes public.
Why Companies Strive to Become Unicorns
Unicorn status is desirable as it attracts the attention of investors and creates opportunities for significant business expansion. It clearly demonstrates the success of a startup, which has not only begun generating revenue but also occupies a significant place in its niche. Investing in such projects is considered profitable, and unicorn status opens new horizons for companies.
For example, SpaceX, founded by Elon Musk, ranks second among unicorns and attracts billions of dollars in investments. When a company reaches a valuation of one billion dollars, it enters various lists of global unicorns, allowing it to establish its presence not only locally but also internationally. This status helps attract the attention of influential figures, including investors.
While companies strive to achieve unicorn status, there are no clear rules or principles for doing so. A valuation of one billion dollars is a natural result of the successful development of the project.
Example of a Unicorn Company
Imagine that you started your company five years ago. Initially, it was small, but then you sold half of the business to a large brand, which contributed to its growth. As a result, the company was valued at 1.2 billion dollars. The question is: will it be included in the unicorn list?
Answer: Yes, it will.