A unicorn startup company is a start-up company that has reached or exceeded $1 billion in value.
This term was coined by venture capitalist Aileen Lee, who defines unicorns as “privately held companies with valuations over $1 billion.”
These startups are often considered particularly innovative because they have succeeded at doing something new and different.
For example, the founders of Pinterest revolutionized social media by creating an interactive platform for creative content like photos and videos.
Facebook’s founder Mark Zuckerberg created one of the most popular social networking sites to date, which now boasts more than 1.6 billion users worldwide!
How do you get unicorn status?
Follow these steps to reach unicorn status;
1). Develop a minimum viable product (MVP)
A product that has just enough features to satisfy early customers, and can be further developed based on customer feedback.
If you are the first company in your industry to create an MVP, congratulations! You have now become a unicorn startup according to Aileen Lee’s definition of one.
2). Determine Your Business Model
A business model is a process for how your company will make money.
There are several different types of business models, including monetization through advertising or subscriptions; selling goods and services to customers; taking ownership in other companies that do these things; receiving investments from venture capitalists (VCs) who hope you’ll go public (IPO); getting acquired by another company with the goal of making more profits together than apart; etc.
Finding an effective business model is key to increasing revenue growth so you can attract investors!
If all else fails…
You may not be able to achieve unicorn status, but don’t let this get you down — there’s still plenty of room at the multi-billion dollar valuation level when it comes to startup success!
3). Secure Funding
When it comes to securing funding, you have options beyond the traditional VC route.
There are many different types of investors out there who can help you get startup capital so your company can grow!
One example is crowdfunding.
Crowdfunding platforms allow you to receive investments from individuals all over the world, typically in exchange for something in return, such as a product or service.
One of the most popular crowdfunding platforms is Kickstarter, where entrepreneurs seek funding to create a project such as a physical product or app.
Other options include:
- Incubators, which pair startups with mentors and resources;
- Debt financing, through banks and other financial institutions;
- Rewards-based financing, such as offering preorders before you launch your product;
- Angel Investors, who typically invest in early-stage startups and do not manage the business day to day; and
- Venture Capitalists (VCs), who make more aggressive investments in exchange for equity in the company.
4). Build a rockstar Team
Great teams win — not just individual superstars! That said, an A+ team can often compensate for an unfocused strategy.
To build a great team you need to figure out what your startup is good at, and then hire people who are the best in their field.
You also don’t necessarily need experienced employees — previous experience can actually be a liability when it comes to startups; “there’s no such thing as overqualified,” says investor and entrepreneur Paul Graham.
You’ve built an amazing product: now how do you get the word out about it?
For many entrepreneurs, PR (public relations) starts with pitching reporters and bloggers in an attempt to land press coverage.
In addition to reaching out to individual reporters or bloggers, there are other effective ways of getting publicity for your startup that take less time –for instance,
Traits of a Unicorn Startup
In a highly competitive market, a startup with a revolutionary product that is differentiated from the competitors stands a chance to become a unicorn.
1). Scalability
A startup will have scalable business models if it can expand revenue without significant increases in costs.
Startups following this model have been most successful when pursuing high-growth markets where demand far outstrips supply.
2). Sustainable Competitive Advantage
Startups need sustainable sources of competitive advantage in order to sustain over time and be able to defend their monopoly against rivals looking to take market share.
Intangible assets such as patents, trademarks, copyrights, etc., provide sustainable competitive advantages for startups that wish not to compete on price or cost alone.
3). Network Effects
Startups that have network effects are more valuable the larger they become.
Network effects come in various forms, including most commonly “demand-side” and “supply-side.”
“Demand-side” network effects apply to products characterized by a high degree of consumer participation – e.g., eBay for selling or LinkedIn for recruiting employees.
On the other hand, “supply-side” network effects refer to products whose value increases with an increase in suppliers or participants – e.g., Uber’s ride-sharing app is more valuable to consumers when there are more drivers available on the platform such as Lyft and Ola (India).
4). Hiring
Using this strategy, startups hire talented individuals who are focused on a particular aspect of the company such as design, marketing or coding.
These individuals bring their existing network and relationships within the industry to the startup and also their skills in scaling businesses quickly.
5). Big Data
The use of big data and analytics is becoming more prevalent among companies with successful unicorn startups using this strategy.
For example, Google has been known to make extensive use of its own search engine’s huge trove of user-generated data for improving searches and product development.
6). Embrace Legacy Systems
Startups that have embraced legacy systems such as Quickbooks, Microsoft Office, or Salesforce have grown faster than those that operate completely independently from such systems.
This allows for increased efficiency and greater decision-making powers for entrepreneurs which enables them to focus on growing their business.
7). Agility
Startups tend to be more nimble than larger, established businesses with the ability to pivot quickly when faced with challenges or opportunities.
This allows startups to try new strategies and make changes in response to market needs rather than focusing on generating short-term profits at the expense of long-term goals – e.g., Facebook’s move into mobile in 2012 instead of prioritizing its then existing desktop site.
8). Capital Efficiency
Unicorns are built on minimal capital investment in relation to revenue generated, unlike most mature companies that require significant capital investments even in areas where they have low marginal returns (Chu 2014).