What are Unicorn startups?

The term  Unicorn,  was first coined in  2013,  by the venture capitalist  Aileen Lee, founder of  Cowboy VC.  Stating in her article ‘Welcome to the Unicorn Club: Learning from Billon-Dollar Startups,’ she estimated the software startups founded in 2000s and figured that a mere 0.7% of them reach a US $ 1billion valuation. The rare occurrence of such firms led to the association of the term Unicorn, the mythical animal. A Unicorn, is a privately-owned startup company valued at over US $ 1billion. A startup is a newly emerged business venture, initiated by individual founders or entrepreneurs, to establish a marketplace need. According to TechChurch, there are  279 Unicorn startups  as of March, 2018.

Associated terms are called ‘Deadcorn‘ and ‘Hectocorn’, which are used for companies with valuation over  US $ 10 billion  and  US $ 100 billion, respectively. Notable lists of Unicorn companies are maintained and updated by the Wall Street Journal, Fortune Magazine, CB Insights and TechCrunch.

When the term was first given by Lee, there prevailed only 39 companies that were categorized as Unicorns. The Harvard Business Review, studied the pacing rates of the Unicorn startups and speculated the companies between 2012-2015 to grow in valuation, twice as fast as companies from startups found in 2000-2013. It is firmly believed that a large number of companies with high valuations, reflect a new wave of technologically driven growth. On the other hand, opinions have formed around the age of globalization and the policies of central banks, in the creation of vast pool of capital that slosh around the globe hunting for Unicorns.

The rationale behind the speedy growth of the Unicorns is multi-fold. The strategy of  GBF (Get Big Fast), adopted by the startups, includes cutting back on prices to gain an advantage on market share and simultaneously expanding at high rates through massive funding. This clears the path and pushes back the rival competitors. Secondly, using of technological advancements  to their advantage, the startups have got an edge over attaining Unicorn status. The social media explosion, mobile smartphones, cloud computing have fostered in the development of these companies towards the Unicorn level. The availability of easy access to private capital  and policy measure in favor of these startups have thrusted their growth rates and increased the investment rates by three-folds from 2013-2015.

The evaluations of the unicorn startups are different than the well-established companies. The valuation for Unicorns, comes from funding rounds of large venture capital firms investing in startup companies. Additionally, the practice of  sharing-economy, also called as ‘collaborative consumption’  or ‘on-demand economy,’ is based on the concept of sharing personal resources. This has resulted in some of the startups gaining the Unicorn status.

The concept of Unicorn startups is far from being mythical, and have become a regular feature in today’s business and economy. According to  CBInsights, the total tallied figure of Unicorns is 220 with a cumulative value of  US $763 billion, in 2017. A few of the top Unicorn startups by valuation are:

Uber:  Projecting a current valuation of  US $ 69 billion, as of December 2017, it tops the list of Unicorn startups with the highest value. Uber, was formerly known as UberCab, is a car sharing, transportation network company, that also constitutes a mobile app to reach to its customers for transport services. Founded in  2009,  it is headquartered in  San Francisco, California, USA.

Didi Chuxing:  Presenting a current valuation of  US $ 56 billion,  it is the second most successful Unicorn startup. It was founded in  2012, as a car sharing, transportation network company. Services spanning across 400 cities with almost 400 million users in China, it is headquartered in  Haidian district, Beijing, China.

Airbnb:  Featuring a  current valuation of  US $ 31 billion, it ranks third in terms of value, in the successful Unicorns. Airbnb, is a property sharing, online marketplace company, with short-term lodging services in variety of vacation rentals, apartment rentals, hostel beds and hotel rooms. It was founded in  2008  and is headquartered at  San Francisco, California, USA.

Below mentioned are the Unicorn startups by valuation by CBInsights listing:

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