What is a unicorn company? Definition and meaning
A Unicorn Company is a startup company that is worth more than $1 billion. The term became popular a few years ago. The vast majority of products that unicorns make are software, while a sizable minority make hardware.
We also refer to these companies as ‘unicorn startups‘ or simply ‘unicorns.’
Wikipedia has the following definition of the term:
“A unicorn is a privately held startup company valued at over $1 billion.”
Unicorn companies often attract substantial investments from venture capital, private equity firms, and wealthy angel investors, eager to back potentially disruptive businesses with rapid growth prospects.
Unicorns contrast with decacorns and hectocorns which are worth more than $10 billion and $100 billion respectively.
Unicorn company – the largest
TechCrunch says that in March 2018, there were 279 unicorn companies.
The largest unicorns in 2018 are Uber, Airbnb, Palantir, Pinterest, and Xiaomi.
Dropbox, which went public in March 2018, is the most recent decacorn, i.e., it is worth over $10 billion.
Unicorns – population growth
The number of unicorns in the world is growing progressively faster each year.
When Aileen Lee first coined the term in 2013, there were just thirty-nine of them. Now, there are more than five times that number.
Harvard Business Review published a study on unicorns by Play Bigger, a Silicon Valley consultancy. The study found that growth in startup valuations was staggering.
Valuations of startups founded between 2012 and 2015 were growing twice as fast as those founded between 2000 and 2013.
A valuation is an estimate of how much something is worth, such as a property, business, antique, or financial asset. In this article, it refers to estimating the value of a company.
Al Ramadan, a Play Bigger founding partner, said the following regarding the rapid expansion of unicorn companies:
“Products and services get discovered and adopted at a speed never seen before. Word of mouth today – through Facebook, Twitter, Tumblr, Pinterest, and so on – is just so fast, and it’s the most effective means of marketing.”
Ramadan added that the launch of the iPhone eleven years ago opened up opportunities for products and services. It also created a new way to distribute software rapidly.
Initially, this distribution occurred just through Apple, but later also through Android app stores.
The valuations of unicorns are very different from valuations people carry out the traditional way.
Traditionally, we have valued companies according to their track records, i.e., past years’ performances.
With these startups businesses, we derive their valuation from growth opportunities. We also estimate their long-term development in their potential markets.
In other words, rather than mainly looking at their history, we look at their potential, i.e., their future.
According to Wikipedia:
“Valuations for unicorns usually come from funding rounds of large venture capital firms investing in these start-up companies.”
“Another significant final valuation of start-ups is when a much larger company buys out a unicorn and gives them that valuation.”
The geographic spread of unicorn companies has also become more diverse, with a rising number originating from emerging economies, reflecting the global nature of innovation and entrepreneurship.
Unicorns not only disrupt traditional industries with innovation but also contribute significantly to job creation, often becoming major employers within a few years of their establishment.
Other types of companies
In the business world, companies are often colloquially categorized using the names of animals and plants. Let’s explore these unique classifications, understand their meanings, and see how each can be used in a sentence:
A startup company valued at over $10 billion.
Example: “After its latest round of funding, the tech startup became a decacorn company, joining an elite group of highly valued enterprises.”
A startup valued at over $100 billion, a rare achievement in the startup world.
Example: “The enterprise’s valuation soared past $100 billion, categorizing it as a hectocorn company, a testament to its groundbreaking innovation and market dominance.”
A fast-growing company, usually increasing its revenues by at least 20% annually for four years or more.
Example: “The software firm is often cited as a gazelle company due to its rapid revenue growth over the last five years.”
A company that balances profitability and social good, focusing on solving meaningful problems rather than just rapid financial growth.
Example: “The new eco-friendly packaging firm is considered a zebra company because it prioritizes sustainable practices alongside its business goals.”
A startup on a growth trajectory to potentially become a unicorn, often with a valuation at or exceeding $100 million.
Example: “With its innovative business model, the startup has become a minicorn and is on the path to achieving unicorn status.”
A startup that has achieved a valuation of $1 million, often seen as a significant initial milestone.
Example: “The mobile app developer just reached a major milestone as a microcorn after securing its first million in valuation.”
A company that is built to survive and adapt in challenging and changing business climates, prioritizing long-term sustainability.
Example: “Their ability to pivot during the economic downturn has proven them to be a true camel in the startup world.”
A startup known for its tenacity and ability to thrive even in tough times, much like the insect it’s named after.
Example: “Despite the harsh market conditions, the company has lived up to its cockroach name by persisting and even growing.”
A Canadian startup valued at over $1 billion CAD, akin to the unicorn in other regions.
Example: “The Toronto-based tech firm has just been dubbed a narwhal after surpassing the billion-dollar mark in valuation.”
A startup that is showing promising growth and is expected to become a unicorn in the near future.
Example: “The fintech company’s rapid expansion and innovative services have it pegged as a soonicorn in the industry.”
These two educational videos come from our sister channel on YouTube – Marketing Business Network. Using easy-to-understand vocabulary and examples, they explain what “Unicorn Company” and “Startup” mean.
What is a Unicorn Company?
What is a Startup?