Do you believe in Santa?
Well, then, do you believe in unicorns?
I didn’t travel anywhere near the North Pole recently, but I can assure you that the latter is real, in a way…
Unicorn Startups are all over the place, operating in various industries.
Key to becoming one?
It’s more like a bank vault with 4 different keys, a passcode, and a retinal scan; yet if you’ve seen a couple of Hollywood films you know that there is always a way to break in.
What is a Unicorn Business?
The word unicorn describes an imaginary horse that doesn’t exist in the real world. Likewise, unicorn startups set out with an imaginary business goal at the beginning. To attain global success and to achieve this goal as soon as possible is the defining feature of unicorn startups. The term unicorn startup has become a commonly used definition in the startup ecosystem. This definition was first used in 2013 by the famous American investor Aileen Lee (founder of Cowboy Ventures) in the article “Welcome to the Unicorn Club: Learning From Billion-Dollar Startups”.
Well, what was this article telling us?
Is it possible for startups established in tiny rooms to turn into billion-dollar companies? If possible, what’s the secret? How large companies like Facebook, Microsoft, or Google have succeeded, thinking once upon a time all of them were only startups?
Let’s make the point clear. As you can understand from the examples above, a unicorn company is a private company with a valuation of over $1 billion. For companies with larger market volumes, there are variations of the unicorn business term: Decacorn and Hectacorn.
- Decacorn is a company with a valuation of more than $10 billion.
- Hectacorns, on the other hand, have a value of over $100 billion!
As of today, there are more than 600 unicorn startups from various industries in the world as stated in the Complete List of Unicorn Companies. These industries are mainly including Big Data, Fintech, Healthcare, Hardware, HR Tech, E-commerce, Logistics, Consumer/Social, Safety, Cybersecurity, Ed Tech, and Legal Tech.
However, companies are excluded from the unicorn startup category when they go public. Many startups such as Alibaba, Flipkart, Meituan-Dianping, Lyft, Adyen, Pinterest, Zynga, Slack, Skype, Box, Roku, LinkedIn, Zoom, musical.ly, are therefore no longer considered as unicorns for this reason.
Distribution of Unicorn Firms by Country
Unicorns are concentrated in few countries such as the US, China, India, UK, Brazil, South Korea, France, Israel, Sweden, Indonesia, Singapore, Switzerland, Hong Kong, Germany, Spain, Portugal, Japan, Australia, Belgium, Canada, Estonia, Luxemburg, Ukraine, United Arab Emirates and nine other.
If we take a look at the unicorn startup distribution by country, we see the US and China are the strongest actors in the competition. In America, Stripe, SpaceX, Databricks, Rivian, Instacart, and Uipath stand out among the top ten unicorn startups.
Chinese origin companies such as Tencent, Alibaba, Baidu, and JD.com, all less than 21 years old, have become super-unicorns.
There are many political, economic, social, and demographic factors defining unicorn startup rates by country. It is not surprising that America is also taking the lead in the unicorn business considering its power to influence the masses by the means of well-established tools such as media or the existence of Silicon Valley in itself.
The reason for the growth in China, of course, can be explained by the large population and therefore the low cost in the production process. From this perspective, they both have the power to reach out to large masses.
The US and China are followed by the unicorns in the UK and India. These four countries are the main actors in terms of the number of unicorn startups.
If you’re wondering why there are no prior tech giant companies on this list, the answer is simple: they were former unicorns. Every exemplary success story starts like this. “Once upon a time, there was a … ” The word to fill the gap is obvious: Unicorns!
How to become a unicorn? : Tips to Create a Unicorn Business
You set off on this road because you simply have a dream. However, building a unicorn company requires more than having a dream.
There is no globally proven recipe for building a unicorn business. However, we can brainstorm about what do unicorn companies have in common. Adding value to your product or service with changes that meet a simple need is one of the key formulas. But of course, it’s not just that.
In this part of the article, we will talk about some common features of unicorn startups and provide some tips.
1) Disruptive Innovation in Unicorn Business
You first need to make a noticeable difference compared to your current competitors. This game-changer differentiation doesn’t necessarily have to be radical. Indeed, it must be simple yet smart.
To clarify, let’s take a look at the Uber example. The transportation sector was already sufficiently developed before Uber. If we think so, this would be a huge mistake.
Uber made a difference by bringing a new perspective to the existing system. It provided great convenience for both the driver and the customer. After all, it is the ultimate winner.
So, it is necessary to measure public demand well and respond to the needs of the general.
2) Customer-oriented Marketing
The customer-oriented marketing principle provides you an advantage also in creating a unicorn startup. The common feature of successful unicorn startups is their emphasis on customer-oriented marketing.
As long as you always keep your customers at the center of your marketing and sales activities, the probability of a successful What is the conversion rate? Conversion rate is the percentage of visitors that visit your website or landing page and convert. Converting in this context means that the visitor does… is considerably high. It is also important to maintain this contact after you have a certain interaction with the audience.
To improve your interaction with the customer, you need to give importance to boost customers’ engagement.
Knowing your ultimate goal and having a well-established business plan make you a good brand. However, sticking to your plan doesn’t mean you won’t change or evolve following the rapidly changing customer trends.
You must always be able to adapt and be flexible when it’s come to customer orientation. For example, large companies such as Apple and Netflix have developed a good strategy in this regard.
There are multiple parameters when improving your consumer-oriented marketing methods. For more detailed information, you can take a look at our blog post about customer success metrics and KPIs to track.
3) Technology-integrated Business
It is now easier for companies to reach new audiences and promote sales compared to pre-tech times. There is no need to even say that in terms of growth and spreading rate, technology is now a basic tool. Giving priority to software and digitalization technologies is at the heart of building unicorn startups.
A great majority of unicorn startups are technology-oriented, software companies. These are easy-to-use software that makes our life easier. This simple trick is just as important as disruptive innovation. They use mass media, effective communication, and transportation innovatively by the means of technology.
That is to say; even if you are in the 20% segment, you need to develop a technology-integrated business.
4) Lots of hard work
We will talk about how long does it take to become a unicorn company later in our article. However, it goes without saying that if you are not one of the lucky few, no success is achieved overnight.
Consistency, continuity, and lots of hard work is the most underestimated part of the story. Giving up quickly won’t move any startup to the next level. This may sound a bit cliché, but trying again and again when things go wrong is the secret. You need to be focused, committed, and motivated all the time.
5) Think Global
If your goal is to reach a figure of $ 1 million as quickly as possible, you need to take your place in the global market. Therefore, you should base your target audience on a global level.
Some needs and values vary from culture to culture, society to society. Global needs and values are what you have to pursue to take your startup one step further and gain unicorn status. Perhaps the biggest reason why software startups are one step ahead in the entrepreneurship world is that they offer a solution to a main global need.
Airbnb (vacation rental company) presented one of the most successful examples of responding to a global need. It provided a basic human need for people from all around the world:lodging. Furthermore, it designed a service that can be accessed from the website and mobile devices. In this way, Airbnb provided great convenience to both tourists and hosts.
6) Finding investors
These are some theoretical tricks. So, what about investment? The answer is easy to guess: Network, network, network!
Unicorns are mostly built on clever partnerships. Firms with high sector value can be invested by angel investors and gain unicorn status to make a serious breakthrough at the global level.
Another important point, maybe the most crucial one is to have a predictable business model. Investors don’t fund hypothetical plans, they want predictable and promising ones.
Additionally, angel investors want to be actively involved in the business they invest in. For this reason, they prefer to invest in businesses that they find close to their interest.
7) Fast Business Growth Strategy
Of course, every business aims to grow and develop a growth strategy in this direction. But we can say that the aforementioned strategy is a little more important for unicorn startups.
Startups are funded in high amounts in such strategies. They try to grow rapidly for eliminating their competitors by creating a competitive advantage and selling the product/service cheaper. Most unicorns prefer this common strategy because; today investors primarily rely on rapid growth strategies for the development of a venture.
These strategies encourage investing large sums of money in each financing round to achieve the largest possible market share and prevent the emergence of other competitors in the market. In return, the value of a unicorn company peaks at each funding round.
Unlike organic growth, rapid growth occurs within a short period. But it is riskier than organic growth in many aspects. But entrepreneurs like to take risks if they will eventually reap the fruits at the end of the story.
How long does it take to become a unicorn?
While some unicorn companies such as Jet.com and Xiaomi have grown in less than 2 years, it can take to gain a unicorn status on average 7 years. This speed varies depending on the development level and economic welfare of the countries.
For example, although Japan doesn’t have many unicorns in number, it ranks first in speed taking just 4 years on average to reach a valuation of $1bn.
Let’s give an example of a game-changer unicorn company in terms of growth rate. We have said that fintech companies are the majority in the unicorn business realm. However, China’s Luckin Coffee, a coffeehouse chain, reached a $1bn valuation within just 8 months!
All that and then some, as of January 2020, it managed 4,507 stores and exceeded the number of Starbucks stores in China.
As we mentioned before, there is no written rule about being a unicorn startup. Let’s take a look at the example of Xiaomi, it came into existence almost instantly and its reputation spread with word of mouth marketing. As this example shows, following technology trends is not always predictable. The rules can change very easily in this game.
Businesses have a 0.00006% chance of becoming a unicorn.
In the light of this data, I have to point out that; yes I am talking about a very low probability.
Yes, it’s hard in many aspects, but not impossible. The direction of the changing world is always a process full of surprises, and history sooner or later rewards good ideas and hard work.
If you also want to grow your business and gain unicorn status, you should first know that becoming a unicorn is a difficult process in many aspects. However, by considering:
- technology integration,
- commitment and hard work,
- global perspective,
- fast business growth strategy,
- the right networking methods,
- and making a considerable difference in the existing sectoral practices
will guide you on this long journey.
Frequently Asked Questions
What is a Unicorn in business?
A unicorn in business refers to a company that is valued at over $1 Billion, and is also held privately.
How many Unicorns are there in the world?
Currently, there are 600 unicorn businesses in the world, with the number changing every year due to the addition of new businesses or companies going public.