Unicorn Company Definition: Decoding the Billion-Dollar Startups

First off, no, we’re not talking about mythical creatures with a single horn on their foreheads. 😂

A “Unicorn” is a privately held startup company that’s valued at over $1 billion.

Crazy, right?

“Unicorn” Haha, who came up with that anyway? 🤔

The term “unicorn” was first coined back in 2013 by Aileen Lee, a venture capitalist and founder of CowboyVC in her article, “Welcome to the Unicorn Club: Learning from Billion-Dollar Startups”.

Unicorn Company Definition

Here is an exact definition by Aileen Lee:

“U.S.-based software companies started since 2003 and valued at over $1 billion by public or private market investors.”

Just like spotting a unicorn in a meadow, stumbling upon a startup that has reached a billion-dollar valuation is equally uncommon.

But unlike unicorns, these companies actually exist.

Well 👀 … barely.

“What do you mean barely?

According to Aileen Lee, Only about 0.07% of venture-backed consumer and enterprise software startups reach a billion-dollar valuation. Recalculating in 2023 (for the US) that number grew to 0.98%.

And, On average, four unicorns are born per year, give or Take. (As of writing this article, there are now Trillion Dollar Companies).

Why Do Unicorn Companies Matter Anyway?

By the way, This is also awesome if you are an investor yourself. 😉

“By definition, unicorn companies are successful. They’ve created a product or service that is not only viable but also incredibly valued.”

Now, don’t get me wrong.

Not all unicorns are content to frolic in the private pastures. Although it isn’t necessary, many unicorns work their way to going public.

But of course… 🙄

The categorization of startups as unicorns has not been without criticism, as it threatens to lose sight of other societally desirable forms of entrepreneurship.

Surprisingly, investors just went with the term … There are other terms used to refer to various levels of company valuations.

Wondering what they are …

There are also what we call, “zebra” and “camel” companies.

What?

Yep! Zebra Companies🦓 aim for a balanced approach, focusing on profitability and societal improvement.

They are characterized by their “black and white” approach, see what I did there? 😁

They strive to be profitable (black) …

While also working to improve society (white).

Unlike unicorns that chase rapid growth often at the expense of profits, Zebra companies adopt a holistic ethos, focusing on quality service and developing a loyal consumer base.

They are not necessarily about dominating the market but about building a sustainable and responsible business.

Camel Companies🐪 on the other hand are designed to survive “droughts” from the very beginning.

And by “droughts” I mean, tough economic times. They have business models that ensure their survival even in adverse conditions.

This means that camels are less dependent on venture capital financing and can operate efficiently even in resource-scarce environments. (I like that👍).

They are built for resilience and sustainability, able to withstand economic downturns and continue their operations effectively.

So which one is the best then?

I wouldn’t say “best”, per se. (More like different).

These terms represent a shift in the startup ecosystem, moving away from the “grow at all costs” mentality often associated with unicorns, towards more sustainable and resilient business models.

They reflect the diversity of strategies and goals among startups, highlighting that there are multiple paths to success.

Examples Of Famous Unicorn Companies

According to Statista as of late 2023, Apple is still somehow the most valuable company in the world!

Apple is number one? Who’s next on the list?

Wait, in fact…

Here are the Top 5 Companies in the world by market capitalization as of 2023:

See the full stat here.

Here are some other Famous Unicorn Companies:

Open AI

As of July 2023, OpenAI’s valuation was estimated to be between $27 billion and $29 billion. This valuation was based on the company’s latest funding round, which closed in April 2023.

OpenAI is still a young company, (believe it or not) it definitely has the potential to be a major player in the A.I. industry.

The company’s valuation reflects the high level of general interest in its tech.

Stripe

Stripe’s valuation has fluctuated in recent years. In March 2023, the company raised $6.5 billion in a funding round at a valuation of $50 billion.

This was a significant reduction from Stripe’s peak valuation of $95 billion in March 2021.

But, I gotta mention: the Term “Stripe” Consistently Maintained an Average of 2M Monthly Searches on the web in the past 12 Months.

SpaceX

The cool kid on the block. 😎

As of July 2023, SpaceX’s valuation is estimated to be around $150 billion. This valuation is based on a secondary share sale of existing shares that took place in June 2023.

This aerospace manufacturer and space transportation company’s successful launch of the Starship rocket, its growing Starlink satellite constellation, its strong partnerships with NASA 🚀 and the US military, made it more famous than Iron Man.

Didn’t Elon Musk appear in the Iron Man Movie?

A side note but yes! 🙂

Elon Musk had a cameo appearance in the first “Iron Man” film released in 2008.

Anyways … moving on.

Instacart

In April 2023, there were reports that Instacart’s internal valuation had been raised by 18%, to $12 billion.

Instacart’s valuation dropped significantly from $39 billion in early 2021, yet it remains valuable due to its strong brand and large customer base.

SHEIN

Shein’s valuation dropped from $100 billion in April 2022 to $66 billion in May 2023 after a $2 billion funding round.

In case you didn’t know:

SHEIN is a China-based fashion e-commerce platform.

The company mainly focuses on women’s wear 👠 but also offers men’s apparel, children’s clothes, accessories, shoes, bags, and other fashion items.

How Many Unicorn Companies Are Out There?

The number of unicorn companies can fluctuate frequently as new startups reach a valuation of $1 billion and existing unicorns either go public or get acquired.

According to data from researchers like CB Insights: As of Oct 2023, there were 1,200 unicorn companies in the world.

The United States has the most unicorn companies, with 712, followed by China with 248. India is in third place with 230 unicorn companies. (In Oct 2023)

Whoa, that’s too low …

True … 😌

But, the number of unicorn companies has been growing rapidly in recent years.

In 2013, there were only 39 unicorn companies in the world. By Nov of 2020, that number had grown to 495. And as of Oct 2023, there are over 1,200 unicorn companies.

This growth is being driven by a number of factors, including the increasing availability of venture capital, the rise of the internet, and the growing popularity of mobile devices.

Are Unicorns Rare?

Spotting A Unicorn.

Unicorns are rare.

But as the data above illustrates, the population of these billion-dollar startups has seen a consistent rise over the years.

To join the Unicorn club, First, a company needs a sizable (very sizable!) … growing market, an outstanding product or service, and a profitable business model.

I’m tawkin’ blow my socks off profitable!

The key is to develop a product or service that’s more than just good – it needs to be groundbreaking.

Second, Innovation.

It should solve a REAL problem, something that leaves people thinking, “Wow, this changes everything!”

When I think of Innovation, I think of Apple! 🤔

Hmm … Well, that explains why it’s number one in the Trillion Companies List.

You can find that below …

The startup ecosystem is heating up with competition. Literally, more than 5 Million applications have been thrown are the IRS every year for the past 3 years … you need something different to stand out.

You need a sustainable and scalable business model.

Is There A Trillion Dollar Company?

There are currently 6 trillion dollar companies in the world: As of Nov 2023, these five publicly traded U.S. companies are currently worth over $1 trillion.

Tesla and Meta have also briefly reached the trillion-dollar valuation mark, but have since fallen back.

NVIDIA is an interesting one I found …

Really?

Selling GPUs, they’re trillionaires?

Although they do a lot of other things including AI, Yes.

They are breaking the physical boundaries of what processors AND A.I. can do essentially. (Read more here.)

•••

The trillion-dollar club is a very exclusive group, and it is likely to remain that way for the foreseeable future.😅 It takes a very large and successful company with years of track record to reach a trillion-dollar valuation.

Should You Invest in A Unicorn Company?

Whether or not you should invest in a unicorn company is kind of a personal decision that depends on your individual risk tolerance and investment goals. But here are some factors to consider:

Obviously, This is just an overgeneralization. And it’s definitely not financial advice.

But … Individual investors keen on investing in unicorn companies can’t do so until these companies go public via an IPO.

FAQs