Unicorns are throughout us — unicorn corporations, that’s. Your favourite graphic design software program or AI device may be a unicorn startup dazzling in plain sight.
The time period unicorn refers to an organization that‘s been given a shiny billion-dollar valuation, and the general public can’t assist however stare at these mystical creatures. Because the time period‘s inception in 2013, they’ve attracted immense consideration and reward; there’s even a actuality tv present known as Unicorn Hunters that capitalizes on this public fascination.
However, how widespread are unicorns, and are these profitable startups as immortal as they appear? Let’s disappear collectively into the enchanted forest and discover out.
Be taught extra unicorn statistics in our State of World Unicorn Startups Report.
Desk of Contents
What’s a unicorn firm?
A unicorn firm is a non-public firm with a 1 billion greenback valuation. Privately owned corporations are sometimes owned by a concentrated variety of shareholders, not like public corporations traded on the inventory market.
Unicorns are extraordinary creatures. Listed here are some fast statistics from our State of World Unicorn Startups Report:
- The U.S. has the biggest unicorn herd. Whereas unicorns can exist anyplace on the planet, the U.S. is dwelling to greater than half of the world’s unicorn corporations. China, the UK, and India observe.
- Expertise corporations possess a particular magic. There are greater than 2x the variety of IT unicorn corporations in comparison with different classes.
- A unicorn firm is not essentially worthwhile. Just one in 6 unicorns have the mandatory recurring income to go public.
- HubSpot is unicorn catnip. A rousing 22% of unicorn startups are HubSpot prospects.
- Billion-dollar startups do not study to glitter in a single day. On common, it takes 9 years for a startup firm to achieve a 1 billion greenback valuation.
- Unicorns can lose their horns. Corporations valued at 1 billion aren’t assured success (instance: WeWork); virtually 17% of unicorn startups lose their unicorn standing or fail.
The time period “unicorn firm” was coined by Aileen Lee, enterprise capitalist and founding father of Cowboy Ventures, in 2013. It was launched in her now-famous TechCrunch article “Welcome To The Unicorn Membership: Studying From Billion-Greenback Startups.”
Unicorn Firm Traits
What components go into a non-public firm valued at a billion {dollars}? A teaspoon of magic, a cup of rainbows, and a dusting of glitter? Whereas there is no precise recipe for a unicorn firm, there are some widespread themes that we see many unicorns embody.
Disruption
The time period disruption within the enterprise world refers to smaller corporations difficult an trade. Whereas it sounds unfavorable, you are fortunately utilizing disruptive expertise proper now. Private computer systems and smartphones are simply two examples of new market disruptions.
Some examples of disruptive unicorns embody:
- ByteDance (proprietor of TikTok), disrupted the social media trade.
- Uber, disrupted the taxi trade.
- Airbnb, disrupted the resort trade.
New Expertise
Behind virtually each unicorn startup is analysis, innovation, and new expertise. This spine is not stunning provided that 3 of the highest 10 unicorn classes are software program (#1), prescription drugs and biotechnology (#7), and healthcare expertise methods (#8).
Be taught extra unicorn statistics in our State of World Unicorn Startups Report.
Some examples of unicorns which are creating modern expertise are:
- OpenAI, the corporate behind ChatGPT.
- SpaceX, an American aerospace producer.
- Rivian, an electrical car producer.
Development Alternatives
Excessive valuations replicate pleasure about an organization’s potential progress alternatives. Within the startup world, progress typically seems like a scalable product that may have international attain.
The significance of progress explains why expertise corporations are so overrepresented within the unicorn herd. Expertise is the best product to scale. With out the hurdle of bodily product distribution, tech startups that serve a common want can distribute their product globally via one central headquarters.
Some examples of corporations which have scaled massively are:
- DoorDash, a personal-use dwelling supply app.
- Tinder, a courting app.
- Notion, a digital workspace.
Public Use
Public use ideally implies that an organization can serve a big audience. Whereas virtually no product will serve actually everybody (even Google has boycotters), a big audience can create extra alternatives than a small area of interest.
Naturally, some success tales contradict this. Palantir Applied sciences is usually listed as a top-ten unicorn firm, however with the tagline “A New Age of Expertise, Warfare, and Deterrence,” it‘s clear that this expertise isn’t precisely as accessible to the general public as Netflix or Airbnb.
Listed here are some examples of corporations that capitalize on common public pursuits:
- Epic Video games, a online game developer.
- Grammarly, a writing assistant software program.
- Reddit, a social media platform.
Visionary Management
What do enterprise capitalists have a look at in unicorns? The founders.
“Unicorn founders are exceptionally nice at studying shortly, making selections, being persistent, and sharing a compelling imaginative and prescient for the long run,” shares Erik Lim, founder and GP of Potluck Ventures. Erik Lim’s enterprise capital agency has invested in 5 unicorn corporations thus far.
“The mixture of those qualities permits them to successfully construct, iterate, recruit, fundraise, shut prospects, and scale,” Lim says.
Some examples of unicorn corporations with visionary management embody:
- Canva, a graphic design software program.
- Pinterest, a visible search engine.
- Liquid Dying, a canned water firm.
Do you may have a startup thought? Come see if HubSpot Ventures will help you carry it to life.
What number of unicorn corporations are there?
An precise variety of unicorn corporations can‘t be calculated, however it’s estimated that there are about 1,500 corporations with unicorn standing. PitchBook lists 1,369 lively unicorns on their unicorn tracker. Crunchbase counts 1,518 lively unicorn corporations.
In an interview with Fortune in January 2024, Aileen Lee stated it is not possible to know the precise variety of unicorn corporations due to geography and disclosure points. “We’d love to make use of income, however no one’s disclosing income,” Aileen Lee informed Fortune.
From 2013 (when Aileen Lee coined the time period) to 2023, the unicorn membership grew 3,026% in dimension, from 39 unicorn corporations to a reported 1,219 unicorns. Nevertheless, Aileen Lee informed Fortune she expects numbers to lower by greater than 30%.
Corporations dropping unicorn standing is not new. The opposite facet of the unicorn coin is unicorpse, referring to an organization that after held unicorn standing however has misplaced important worth.
That is simply the tip of the spin-off jargon iceberg; minicorn, decacorn, and hectocorn are a number of different phrases impressed by Aileen Lee’s “unicorn” coinage.
Unicorn Valuations
With a unicorn’s horn hinging on the coveted billion valuation, it is essential to know the place that quantity comes from.
“Unicorn valuations come from evaluations and evaluation performed by enterprise capital corporations and traders that overview income and enterprise fashions in comparison with the alternatives and progress of the respective markets/trade,” stated Doug Applegate, the Affiliate Director of Purdue Incubator.
Doug Applegate has over 15 years of expertise and abilities in startup accelerators and incubators, enterprise capital, and companion/sponsor growth. He shared these insights on the variations between unicorn valuations and unicorn inventory valuations:
“Unicorn startups, sometimes privately held, typically challenge most well-liked inventory to traders and enterprise capital corporations, not like the widespread inventory traded in public markets post-IPO. The transition from personal to public or acquisition standing results in the lack of unicorn classification; as an illustration, Uber and Dropbox ceased to be unicorns upon their IPOs. Nevertheless, each privately held and publicly traded corporations exceeding $1 billion in valuation are uncommon entities and are sometimes thought to be extremely profitable.”
A number of the unicorn examples listed above (Airbnb, Uber, and Pinterest, to call a number of) fall into this post-unicorn class.
Unicorns and Enterprise Capital
What’s the connection between unicorns and the enterprise capital trade? Enterprise capitalists are traders who concentrate on startup corporations.
“A enterprise capitalist, or VC for brief, can concentrate on quite a few completely different industries and particular levels of firm growth, however what connects them is that enterprise capitalists are a driving pressure behind the valuation of corporations,” says Jordan Meier, enterprise capital affiliate and founding father of the enterprise capital agency Uni Syndicate.
“If a startup desires to boost cash, they’re going to typically go to a VC as a result of they command massive quantities of money, can present priceless connections, and each perceive and anticipate the dangers that include investing in startups,” Meier notes.
How will you spend money on a unicorn firm?
Meier says that you could be already have a stake in a single. “Many pension funds, college endowments, and insurance coverage corporations spend money on Enterprise Capital funds. By proxy, the financial acquire of startup unicorns will carry over to you in a really small approach.”
For particular person traders who’re fascinated about taking a extra lively function in investing in unicorn startups, Meier warns that though there’s numerous capital sloshing round, unicorns are a statistical rarity.
“Startup investing is exceptionally dangerous, and 9 out of any 10 enterprise capital investments are full losses. Diversification of startup investments is extremely inspired, however even with that, there isn’t any assure they may make any cash in any respect, not to mention discover a unicorn,” Meier says.
Nonetheless inquisitive about investing in certainly one of these companies? Jordan Meier shared this recommendation for keen personal traders.
Spend money on an actively managed enterprise capital fund.
A fund supervisor might be put accountable for discovering, conducting due diligence, and putting funds into numerous diversified startup corporations.
A overwhelming majority of unicorn corporations will obtain some type of enterprise capital funding. This might be reserved for accredited, high-net-worth people who’re keen and in a position to make investments a whole lot of 1000’s to thousands and thousands of {dollars} at a time.
Develop into an Angel investor or be a part of an Angel investing syndicate.
You may individually (or as a part of a gaggle) discover corporations to spend money on, conduct diligence, and distribute your funds to startup corporations. You will have the flexibility to select and select which corporations you want to spend money on on a deal-by-deal foundation.
That is reserved for accredited traders, however the greenback quantity per firm is normally a lot decrease, as little as $1,000 per firm.
Make investments via an fairness crowdfunding web site.
Web sites like Republic supply startups the chance to boost capital immediately from people. You do not want to be an accredited investor, and you’ll make investments with as little as $100. It will likely be tougher to discover a future unicorn at this stage, however given the decrease capital required to enter, you do not want to spend money on a unicorn to see return in your funding.
Examples of Unicorn Corporations
Don‘t really feel dangerous should you’re model new to the enterprise capital world. I‘m going to indicate you a few of the most well-known unicorn startups, and also you’ll be pleasantly shocked to see that you just’re already acquainted with a few of these enigmas.
OpenAI
Billion-dollar startups are born all world wide and might exist in any trade, but when expertise and Silicon Valley are popping into your head, it‘s for good purpose. That’s the precise intersection the place OpenAI was born in 2015.
OpenAI is maybe essentially the most talked about expertise firm after it launched ChatGPT in November 2022. OpenAI was based by Elon Musk, Sam Altman (present CEO), and several other others in San Francisco. A few of its key qualities are:
- Market dominance. Whereas there are different AI merchandise in the marketplace, OpenAI cemented its place as a pacesetter on this area.
- Firm management. With Elon Musk as an investor and a collaboration with Microsoft, there’s numerous established, influential folks providing steering.
- New expertise. OpenAI did one thing that few startups can say: they created a product that modified the world.
Canva
Canva is among the happiest components of the web, the place anybody could make their goals (or Christmas playing cards, enterprise playing cards, or iPad wallpapers) come true. Based by Melanie Perkins in Australia in 2013, Canva is a graphic design software program for regular folks, accessible at a standard price.
These too younger to recollect the pre-Canva days will not imagine how a lot cash companies paid graphic designers to do minuscule design duties, like creating fundamental icons. Graphic design was a ability guarded by costly and difficult-to-learn software program. What began as a bootstrapped dream grew into software program utilized in 190 international locations when it acquired its 1 billion valuation in 2018. A few of Canva’s key qualities are:
- Innovation. The considered anybody with the ability to do graphic design was a revolutionary thought when the market was so dominated by Adobe’s superior merchandise.
- Adaptability. Canva initially targeted on yearbook design however pivoted two years into enterprise to concentrate on the uncapped basic market.
- Fixed refinement. Founder Melanie Perkins stated that her imaginative and prescient with Canva was to “construct the world’s most respected firm.” Each Canva consumer (and is not that every one of us?) can attest that the platform is continually refining options, streamlining the interface, and bettering the platform.
Vinted
Everyone knows that the under-loved garments in our closets are value cash; one lady put the answer to this shared need in our pockets. Based by Milda Mitkute in 2008, Vinted is Lithuania’s first unicorn firm. You can say that Vinted is like eBay however cooler and simpler to make use of.
Once I was eliminating all of my stuff to go touring in 2023, I turned to eBay to promote worthwhile gadgets. I trusted the platform, however it was one way or the other a headache. I Googled a newbie’s information to reselling on eBay and finally stumbled throughout an advert for Vinted, the place I used to be hooked.
Vinted felt trendy, made by somebody nearer to my age with intentionality. Listed here are a few of Vinted’s key qualities:
- Disruptive. The net secondhand market was undeniably worthwhile, however customers had complaints. Vinted solved them.
- Universality. The will to earn cash from unworn garments transcends social teams and revenue lessons.
- Momentum. Vinted management has stated that they noticed large progress in 2016 after bettering the consumer expertise. The corporate acquired its 1 billion valuation in 2019, and says that they are nonetheless solely at the start of their journey.
Liquid Dying
“Homicide your thirst.” It‘s a slogan that you just solely want to listen to as soon as to recollect eternally. That’s the catchphrase of Liquid Dying, a startup that achieved a billion valuation in March 2024, an organization that is carried out the seemingly not possible: flip water right into a billion-dollar product.
Liquid Dying was based by Mike Cessario in 2017 and is at the moment headquartered in Los Angeles. The product is straightforward: water bought in a tallboy aluminum can. Yep, somebody managed to lastly make water cool. A few of Liquid Dying’s key qualities are:
- Marketability. Founder Mike Cessario informed Inc. that he aimed to create a product that marketed itself by being photogenic sufficient that customers included it of their social media content material.
- New market. Mike Cessario designed Liquid Dying to have a “party-drink look” in order that it could possibly be consumed at a bar with out anybody noticing it was simply water.
- Consciousness of client issues. Liquid Dying doesn‘t take itself significantly, however it does converse to a critical client concern: the influence of plastic packaging (water’s typical housing). It as a substitute makes use of aluminum, citing its sustainability.
Discovering Billion-Greenback Startups
Who will develop into the latest member of the unicorn membership? Non-public market traders will proceed searching, and startup founders will preserve innovating and dreaming of becoming a member of the herd.
Unicorns could seem distant and mystical creatures, however provided that 22% of unicorns use HubSpot, you may have one thing in widespread with these corporations simply by being right here.
Be taught extra unicorn statistics in our State of World Unicorn Startups Report.