What Is A Unicorn Startup & How To Be One

In the venture capital industry, the term unicorn refers to any startup that reaches the valuation of $1 billion. 

Recently one of the most used editing tools, Grammarly became a unicorn.

We often talk about unicorns like Uber, Airbnb, Snapchat & Pinterest but little do we discuss what does unicorn exactly mean. Ever wondered why some startups given this title? What are the criteria to get this title? Or have you just wondered, how to be a unicorn?

If yes, this guide is for you.

Read further to know all things unicorn! 

What does it mean to be a unicorn

In the venture capital industry, the term unicorn refers to any startup that reaches the valuation of $1 billion. 

The term was first coined by Aileen Lee, founder of Cowboy ventures when she referred to the 39 startups that had a valuation of over $1 billion as unicorns. The term initially was used to lay emphasis on the rarity of such startups. The definition of a unicorn startup has remained unchanged since then. However, the number of unicorns have gone up.

Features of a unicorn startup

To be a unicorn is no cakewalk and each unicorn today has its own story with a list of features that worked in their favour. We have listed down a few pointers that are commonly seen across all the unicorns:

  • Disruptive innovation: Mostly, all the unicorns have brought a disruption in the field they belong to. Uber, for example, changed the way people commuted. Airbnb changed the way people planned their stay while travelling and Snapchat disrupted the usage of the social media network etc.
  • The ‘firsts’: It is seen that unicorns are mostly the starters in their industry. They change the way people do things and gradually create a necessity for themselves. They are also seen to keep innovation up and running to stay ahead of competitors which might later boom.
  • High on tech: Another common trend across unicorns is that their business model runs on tech. Uber got their model accepted by crafting a friendly app. Airbnb made the world seem smaller by making the best of the world wide web. 

A recent report suggests that 87% of the unicorns products are software, 7% are hardware and the rest 6% are other products & services.

  • Consumer-focused: 62% of the unicorns are B2C companies. Their goal is to simplify and make things easy for consumers and be a part of their day to day life. Keeping things affordable is another key highlight of these startups. Spotify, for example, made listening to music easier to the world. 
  • Privately owned: Most of the unicorns are privately owned which gets their valuation bigger when an established company invests in it. 

According to CB Insights, there are 361 private companies around the world valued at over $1 billion. India has 16 of these companies, taking 4 percent of the overall share. Also, India is just a shade below the UK, which has 19 unicorns with 5 percent overall share.

Can only a startup be a unicorn?

The answer is yes. Unicorn is a term given only to ‘startups’ who have a valuation of over a billion. The startups that exceed the valuation of $10 billion are grouped under the term called decacorn (a super unicorn). Dropbox, SpaceX and WeWork are some of the examples of decacorn. 

For the startups based out of Canada, there is an exclusive term for what we call a unicorn. It is ‘narwhal’. This means that any Canadian startup company with a valuation of over $1 billion is called a narwhal. Hootsuite and Wattpad are two examples of Narwhal companies.

Examples of unicorn startups

Uber: Thanks to the day when Travis Kalanick & Garrett Camp failed to get a taxi in Paris. Back in 2009, on a snowy evening, they came up with this idea of developing an app to request taxis. Since then the idea has shaken the taxi market in over 450+ cities and being a unicorn in just six years! 

Flipkart: Founded in 2007 and listed under one of the largest e-commerce brands across India, Flipkart is a success story of two friends, Sachin Bansal and Binny Bansal. Amongst all the other e-commerce startups in India, Flipkart stands way ahead with the current valuation of more than $15.5 billion. 

PayTM: Founded by Vijay Shekhar in 2010, PayTM is owned by One97 Communications, founded in 2010, when mobile had just entered the life of common man in India. Gradually One 97 Communications moved from mobile top-up service to bus and train ticket booking, bill payment enabler to a full-fledged payment service provider for businesses and was named PayTM. With the current day valuation of around $2 billion, PayTM has certainly come a long way.

The word ‘unicorn’ has come a long way from just being a mythological creature to a regular feature in business and finance discussions. Today, unicorn companies have attained recognition and made a place for themselves in the market. That said, it is not necessary that every unicorn will end up being a successful startup. The point is, any startup mustn’t stop hustling after touching a milestone.

Hope this article helps you connect dots to execute all that you have been planning!

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Published by Khushali Shah

Khushali is a content marketer at Razorpay. A logophile, traveler and inbound marketing enthusiast, she loves questioning the 'why' and 'how' of almost everything.

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