The term “unicorn business” has become increasingly familiar in the last decade. But what exactly is such a company, and what makes them unique?
Let’s start with the basic definition, according to Wikipedia: A unicorn is a startup company valued at over 1 billion dollars which is privately owned and not listed on a share market.
There’s a little more to it than that, as we’ll see below, but that’s the essence. So why are these startups known as “unicorns”?
Unicorn history
In 2013, a study by venture capitalist Aileen Lee’s company Cowboy Ventures showed that less than 0.1% of venture-backed software startups were valued at over 1 billion dollars by investors.
To describe this very rare phenomenon, Lee coined the term “The Unicorn Club”, saying ‘Yes we know the term “unicorn” is not perfect – unicorns apparently don’t exist, and these companies do – but we like the term because to us, it means something extremely rare, and magical’.
Lee and her team identified 39 such firms in the USA, and by 2018 there were still only 119 members of the unicorn club worldwide. But numbers have increased hugely in the last five years: in September 2024 there were more than 1400 unicorn companies globally.
How to identify a unicorn
Unicorns operate in many sectors, but as well as the 1 billion dollar valuation and being unquoted on the stock market, they also share a number of other characteristics:
- Exploiting new technologies
- Prioritising rapid growth
- Applying innovative business models
In other words, it’s not enough for a privately-owned company merely to be valued at more than a billion dollars to be a unicorn. The firm also has to use new technology to command a previously untapped market, or to approach a market in a different way – leading to incredibly rapid growth.
Foundations are important
A 2023 study discovered that when entrepreneurs have been involved in building one unicorn, they’re more likely to be able to found another. They tend to form small founder teams, sharing academic or professional experience as well as the entrepreneurial spirit and desire for growth that characterises the successful unicorn.
New but familiar
Although recent, many unicorns have become household names. Names such as SurveyMonkey, Pinterest, Grammarly and Canva.
Habitat
Most unicorns are located in the United States, closely followed by China (with more unicorn firms in Beijing than in Silicon Valley) and finally Europe.
In Belgium to date there are only three unicorns:
- Collibra applies data intelligence to help its customers make data-driven decisions.
- Deliverect provides software solutions for the food service industry.
- Odoo offers a suite of open source business applications covering all of their customers’ needs.
Other flavours of corn are also available
As the “unicorn” label has become more familiar, a variety of other terms have come to describe unicorn-adjacent startups.
- Minicorn: a valuation in excess of 1 million dollars.
- Soonicorn: a rapidly growing startup with the potential to reach the 1 billion dollar valuation in the near future.
- Decacorn: valued in excess of 10 billion dollars.
- Hectocorn: the very rare startups valued above 100 billion dollars.
And one with a hump rather than a horn – the camel, a startup that can survive unfavourable conditions with minimal resources.
Unicorn challenges
But even once they’ve hit the 1 billion dollar valuation mark, things aren’t all plain sailing for these companies. Managing the characteristic rapid growth can be challenging, and when the innovation is out there in the market there’s nothing to stop other companies setting up in competition. It can also sometimes be difficult to achieve profitability – in other words, to maintain the original valuation of the company, fulfil growth forecasts and thus retain investor confidence.