Unicorn (Company) Definition
A unicorn company is a term used to describe a finance or venture capital company that worths $1 billion or more than. A privately held startup company that values one billion dollar or more in a current market valuation is regarded as a unicorn company. The statistics and market value of successful companies are always presented in a unicorn list. This term ‘unicorn company’ is derived from a legendary animal ‘unicorn’ which has its horn projected. This term hence describes something that is highly desirable but difficult to find or obtain especially when it is related to finance or venture capital industry.
A Little More on What is a Unicorn
Aileen Lee, a venture capitalist and the founder of Cowboy Ventures (CowboyVC) coined the term ‘unicorn (company)’. The term was coined in 2013. Using the core features of a mythical animal, Aileen Lee describes companies that worth over $1 billion at a period of valuation and unicorn companies. This height is one that many firms reach out for but it is quite complex to attain, hence, for a company to worth $1 billion or more, it must be extraordinary or have distinguishing features that set it aside from competition.
Looking at software startups founded in the 2000s, only 0.07% of them reached $1 billion valuation which is found to be rare. According to Lee, the first unicorns were founded in the 1990s while many other unicorns were founded in the 2000s.
Unicorns were publicized in Aille Lee’s article, “Welcome to the Unicorn Club: Learning from Billion-Dollar Startups,” she supported these terms by showing startups that were significantly successful (with over $1 billion) in the technology sector.
However, as analysed by an investment guru, Bill Gurley, quite a number of venture investors have neglected traditional risk analysis but only focusing on having shareholding positions in unicorn companies. Hence, the influence of unicorn companies in internet bubble that occurred in the late 1990s have stirred constant debate among professionals. While some regard increase in on new companies valued above $1 billion as worthless in markets, others see the increase as a reflection of technologically driven productivity.
Current unicorns are companies that have made it into the unicorn list in recent times. These are companies with success records and high productivity, having realized at least $1 billion as at the period of valuation. Fortune magazine created a unicorn list with more than 100 entries of current unicorns. In 2017 also, 220 current unicorns were listed by CB insights with a value of $763 billion. In 2018 as well,16 US companies became unicorns, with about 119 private companies globally valued at $1 billion or more. China is also another country that has a good number of current unicorns.
References for Unicorns (Startups)
Academic Research on Unicorn Company
Electronic finance–recent developments, Dandapani, K. (2017). Electronic finance–recent developments. Managerial Finance, 43(5), 614-626.
Unicorns, Cheshire cats, and the new dilemmas of entrepreneurial finance, Kenney, M., & Zysman, J. (2018).
How to Catch a Unicorn, Simon, J. P. (2016). EC JRC IPTS, forthcoming.
The 400 Percent Loan, the $36,000 Hotel Room, and the Unicorn, Berlau, J. (2012). Competitive Enterprise Institute, OnPoint, (176).
Role of Unicorn tag in gaining legitimacy and accessing funds, Kerai, A. (2017). The Business & Management Review, 9(2), 119-127.
Analysis on Risks and Countermeasures of Unicorn Enterprises Based on “Diamond Model”, Han, R. (2018). Open Access Library Journal, 5(09), 1.
Finding the Next Unicorn: When Big Data Meets Venture Capital, Weibl, J., & Hess, T. (2019, January). In Proceedings of the 52nd Hawaii International Conference on System Sciences.
Unicorn Stock Options-Golden Goose or Trojan Horse?, Alon-Beck, A. (2018). Unicorn Stock Options-Golden Goose or Trojan Horse?.