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What Makes a Unicorn a Unicorn?

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May 10th, 2023





In mythology, a unicorn is a symbol of purity and grace. In private market enterprise, a unicorn is a fast-moving animal with a single antenna pointing in the direction of continuing rapid growth from a solid foundation. Unfortunately, unicorns are a scarce species – we examine some of the attributes that make these precious fledgling companies stand out in a field of horses.

"Be a unicorn in a field of horses."


The above proverb, which may well have Hindi origins, serves as a great reminder that people and businesses need to embrace what distinguishes them from others. Be unique and stand out from the crowd…be a unicorn in a field of horses!

In investment parlance, Aileen Lee, a renowned venture capitalist, first coined the term ‘unicorn' in an article written in 2013. Lee estimated that just 0.07% of early 21st-century software startups would achieve a valuation of 1 USD billion, truly a tiny number of unicorns in a very large field of horses. This value specificity constitutes the primary element of the accepted definition of a unicorn, but two further components of the widely used ‘SMART’ acronym clearly apply, namely achievable and relevant. If a startup is not relevant to convenience, efficiency, entertainment, or societal development, it will never achieve unicorn status.

As previously intimated, unicorn companies are startups that reach a valuation in excess of USD 1 billion without being listed on any stock market. Nevertheless, it is easy to argue that unicorn status is not intuitively measurable because of the lack of daily valuations in the private markets universe. Contrast this with public markets, where, for example, the market capitalization of companies quoted on traditional stock exchanges is simple to calculate. The formula is the number of shares in issuance multiplied by the prevailing share price. Not only is the information required for both elements of the calculation firmly in the public domain…the market cap itself is quoted in the financial pages of many publications.

So, how do you value a private enterprise?

The measure of the value of a prospective unicorn company is typically based on its most recent round of funding. If, for example, venture capitalists inject USD 40 million into a business in exchange for a 5% equity stake, the business is valued at USD 800 million (20 [the reciprocal of 5%] x 40 million).

Alternatively, it is not uncommon for unicorns to be acquired by listed companies, with a popular example being Instagram. Facebook acquired the enterprise in 2012 for USD 1 billion. This made Instagram an overnight Unicorn, but, once under the ownership of Facebook, Instagram automatically lost its unicorn status as quickly as it had attained it. Mark Zuckerberg has subsequently been lauded for making one of the best tech acquisitions of all time.

So far, we have covered the first four elements of the SMART acronym, namely specific, measurable, achievable, and relevant. But how do we put a timescale around achieving unicorn status?

Well, the speed record is held by a US shopping site,, which achieved a USD 1 billion valuation just four months after the company was founded. However, it typically takes five-to-seven years to achieve unicorn status, and this involves, on average, five funding rounds.

Where unicorns are most prevalent…

People familiar with the outsourcing theme, which dominated business-model innovation in the early noughties, might reasonably expect to see that Asia is the epicenter of the development of niche companies with the ability to rapidly turn an idea into a business with outstanding growth potential. After all, 20 years ago, China was the world’s manufacturing hub. At the same time, India was blessed with scores of graduates who were willing to work for peanuts, by Western standards, in service industries, such as pharmaceuticals.

However, the third decade of the 21st century demonstrates that North America is not only home to the world’s largest stock market by capitalization (accounting for around 70% of the MSCI World index), but it is also the globe’s core center of unicorn creation.

Three essential attributes of a unicorn…

Commitment to growth and innovation: Startups wishing to become extremely successful in a relatively short space of time recognize that growth must be the top priority. To help achieve this, they develop a positive company culture and offer incentives to align the interests of the employees and the business, so everybody shares in the success. It is also intuitive that unicorns must be trendsetters rather than trend followers, so a continuous focus on innovation is a prerequisite.

Embracers of technology: Unicorns are more successful than their peers because they are early adopters and users of the latest technology. This partly explains why there are a comparatively high number of fintech unicorns. However, many non-tech companies achieve unicorn status because the use of the latest technology gives them a competitive edge and the ability to scale their businesses faster.

An obsession with customer satisfaction: To turbocharge their growth potential, startups need to invest substantial resources in market research, to clearly identify a niche to exploit, and subsequently establish feedback mechanisms to develop strong relationships with their customers. It is also important to establish a strong profile on social media to encourage customers to become brand advocates and share the content with others.

A unicorn in a field of horses…

Each year, thousands of new ‘horses’ are created, and the respective management teams dream of, one day, achieving unicorn status. Unfortunately, statistics show that more than half of these businesses will fail to reach their fourth anniversary. Of the minority that remains, very few will blossom into a unicorn. Those that do will have some vital attributes in common, such as an intensive growth focus, a passion for technology, and a dedication to creating a singular customer experience.

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