At What Stage is a Startup Considered a Unicorn?

By November 9, 2016Uncategorized

The term Unicorn has different meanings in a business world. A unicorn is usually a startup company that does not have an established performance record, with a stock market valuation or estimated valuation of more than $1 billion. The term was originally coined by the venture capitalist Aileen Lee who is the founder of Cowboy Venture. It was a seed stage venture capital fund based in Palo Alto, California. Lee also argued that the first unicorns were founded in the 1990s, Google Inc. (GOOG) being the clear “super-unicorn” of the group. Many unicorns were born in the 2000s, though Facebook Inc. (FB) is the decades only super-unicorn.

 

Now we’ll discuss different steps from startups to Unicorn. In today’s world of startups, there are three ultimate outcomes: failure, modest success, and very rarely – spectacular success. As we discussed earlier, the unicorn is venture capital slang for a startup with a valuation of $1 billion or more. These are the pin-ups of the seemingly endless wave of innovative tech companies to close significant funding rounds in recent times.

 

But how rare is this success? A typical venture capitalist meets with approx 1,000 new or young companies each year and funds around two of them. For every 10,000 startups that receive funding, only one becomes a unicorn — the venture capital slang for a startup valued at $1 billion or more. In short, the chances of achieving startup success at the unicorn level are very rare. So rare, that it is about one in five million. Most of the other companies just run out of cash, while a handful is bought for substantial – but not spectacular – sums.

 

A deciding factor between success and failure is whether an entrepreneur can find enough growth opportunities and direct the startup’s resources to capture enough market share to reach $100 million in revenue. Judging by recent examples – Uber, Snapchat, etc. – this seems to be a prerequisite for any startup hoping to go public. If your startup is to be the next unicorn you’ll need to maximize your growth opportunities. Here are various tips to find the right startup growth opportunities:

 

Solve a familiar problem

To gain success, get familiar with the problem that you truly want to solve through your company. Focus on that problem and find out preferable solutions to solve that with your startup.

 

Test your assumptions quickly

The customer is always right and as an entrepreneur, it’s crucial for you to be responsive to your customer’s wants and needs. You can put your startup on the right track by doing so-called A/B testing. This test helps you to find out which customer segments will want your product. Repeat this process, until you have figured out which product features generate the most positive response.

 

Build and test a prototype 

The next step is to create a prototype of your product or service that includes all the features that are most needed for your customers. Don’t stop improving on your prototype after receiving the first round of positive feedback from customers. Keep working on your prototype and testing it with potential customers until you get that kind of feedback.

 

Sell to your initial markets

If you’ve got this far you probably have a product or service that the market needs. Unfortunately, that’s not always enough. You’ll need to build a sales and marketing machine in order to break the $25 million thresholds and saturate your home market.

 

Expand Globally

To reach $100 million in sales in your initial market, you need to go after the right global markets. It means you have to expand internationally with a careful strategy.

These are the five tips that help a startup business to become a unicorn. For this, you need to find local partners who can share your vision and have the right skills and incentives to help you achieve your goals.

 

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