A privately owned company called a unicorn has a market value of more than $1 billion. It might be worth $1 billion now, but the company isn't listed on any stock market. Unrealistic business estimates made by investors in funding rounds for unicorns show how much they are worth. Investors mostly look at a unicorn startup's expected growth and development when deciding how much it's worth since all unicorns are relatively new businesses.

It is a big deal when a new business becomes a unicorn. It shows that the company has a bright future and has raised a lot of money. Numerous unicorns become known in the end, but it's not necessary. Not all unicorn startups last, though, and many don't live up to the high expectations set by their values.

Origin of the term Unicorn

They were initially called "unicorn" by venture capitalist Aileen Lee in a 2013 TechCrunch article. Her analysis predicted that just 0.07% of 2000s software startups were worth $1 billion. Start-ups that made it to this milestone were so uncommon, according to Lee, that locating one was comparable to finding the fabled animal.

Lee calculated that over the preceding ten years, four unicorn startups had been born annually. As 'Facebook' was listed in 2012, Meta Platforms Inc. was valued above $100 billion, making it the breakout ' super unicorn.' To put a reasonable estimate on the number of tech businesses founded at that time, around 60,000, just one out of every 1,538 became a unicorn.

However, Lee discovered that there were one or more super unicorns for every major technical breakthrough wave, including the development of the personal computer in the 1970s, the introduction of the modern internet in the 1990s, and the advent of the new social networks in the 2000s.

Examples of Unicorn Companies

The world's most valuable unicorn startups are listed below:

• Didi Chuxing (China): A car rental firm.
• WeWork (USA): Coworking space provider.
• Airbnb (USA): Vacation rental platform.
• SpaceX (USA): Aerospace transportation firm.
• Stripe (US): Allows people and companies to receive online payments.
• Epic Games (USA): Fortnite developer.
• Uber (USA): A smartphone app for transportation services.

How Do You Build a Unicorn?

Unicorns should offer a value proposition or a product or service that changes people's lives and fixes a problem they didn't know they had. Cell phones are a great example in this context. Twenty years ago, everyone had landlines, and no one minded.

After providing a service that customers didn't know they required, the company must create that service. It was enough for most people who first got a cell phone to be able to make phone calls. Later on, though, people started wanting to take pictures with their phones, which made companies put cameras in their goods. When customers' needs change, businesses that can't shift or don't want to change will eventually go out of business. Translated, a unicorn's value offer needs to change as its business and environment do.

In order to become a unicorn startup, a business needs to find possible fanscustomers who will not only buy its products but also tell others about them. Trying to get people by focusing on any random group might not be worth the time, money, or effort.

Many unicorns were founded after the dotcom boom and collapse in the early 2000s, saving them from failure. Although the local economy is bad during the decline, some people do better than others. Not surprisingly, creating a unicorn company is not easy, and there is no magic recipe that will guarantee success. Luck could be an important factor that affects the outcome.

Pros and Cons of Unicorn

Pros

Growing Businesses

The potential goal for a unicorn is to make long-standing, profitable companies that are expanding. These companies expand swiftly and gain huge market shares in their fields. Many unicorns have thrived because they offer market-needed goods or services. Due to their success, unicorn investments attract investors. New ideas and great leadership fuel these companies' sustained development. Unicorns dominate their areas because they pioneer new trends.

Positive Business Outlook

Most unicorns have a positive outlook and intend to develop. These firms often get many unicorn investment rounds, helping them grow. These fast-growing startups with novel ideas inspire investors. Market demand, industry trends, and a successful company strategy can boost optimism. Many people are banking on unicorns to dominate their professions and deliver significant returns to investors as businesses develop.

Vetted by Investors

Professional investors examine unicorns before valuing them. The potential goal for a unicorn is to seek companies with large market opportunities and development potential. Financial professionals consider business ideas, revenue sources, market, and growth potential before investing in unicorns. Undergoing such a rigorous review helps unicorns gain credibility and attract significant investors. While creative, this method gives unicorns the skills they need to flourish. Unicorn investment experts' expertise helps unicorns succeed in competitive marketplaces.

Cons

High-Risk Investments

Unicorn startup investing is risky, particularly for individual investors. These enterprises frequently have dubious finances and are more likely to collapse than older ones. Unicorn ventures are sometimes difficult to sell for cash. If the company underperforms, lack of liquidity may make it tougher for purchasers to get their money back. Unicorns' financial information may be difficult to obtain, making it difficult for investors to assess their value and dangers.

Hard to Invest In

When unicorn startups are private businesses, it's hard for regular investors to put money into them. Funding for these businesses usually comes from wealthy individuals and large donors, like venture capitalists. Regular buyers can't invest in private companies because they don't sell on public stock markets.

Unfortunately, this makes it harder for regular people to invest in businesses that are growing quickly. Even fewer people can invest in unicorn investments because they are usually only open to people who have access to private markets or who get invited by venture capital firms.