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What is a Unicorn Venture-Backed Startup?



Whether you know it or not, you’ve probably used services from a unicorn company. Some household names of unicorns are Uber and Robinhood. Don’t know what a unicorn is? Unless you’re involved in the venture-backed startup industry, you probably aren’t familiar with the term.


So, what is a unicorn, and what makes a company one? Simply put, a unicorn is a company valued at $1 billion. That’s a pretty big deal for a startup company. Let’s look at the answers to those questions and why the number of unicorn companies is growing.


What is a Unicorn?


To start, a unicorn is a venture-backed startup valued at $1 billion. These companies are usually privately held, which is one reason they are able to build up such a large value. The term ‘unicorn’ was coined by venture capitalist Aileen Lee in 2013. She used the term unicorn, because at the time they were incredibly rare, just like a unicorn.


Well, things have changed and unicorns are growing in numbers everyday. Back in 2013, there were 39 unicorns. As of January 2022, there are over 900. This rapid amount of growth was unexpected, and venture-backed startups are all striving to be the next unicorn. Instead of being unicorns, these companies are becoming part of the norm in the venture-backed startup world.


Examples of popular unicorns:

  • Uber

  • Robinhood

  • Airbnb

  • SpaceX

  • Epic Games

Why Are Unicorns Growing So Rapidly?


When unicorns first started to pop up, they were mostly US-based companies. Now, unicorns are spread out across the globe. The majority of unicorns still reside in the US, as well as China. Around 25% of unicorns are located in China, while 48% reside in the US. Venture capital investors have been able to invest large sums into companies, which is one reason there has been such an increase in unicorn companies.


When Lee coined the term, the qualifications were more specific, and a unicorn has broader terms now. In 2013, the requirements were that a unicorn be a US-based software company that had been in business since 2003 valued at over $1 billion by public or private investors. Now, a unicorn can be in any industry, and new terms for variants have opened up the doors.


Unicorn Variants


Now that unicorn companies have grown to such large numbers, variant terms have been created to encompass those even larger. A ‘decacorn’ is a company valued at over $10 billion, and a ‘hectocorn’ is a company valued at over $100 billion. Who knows, in the next few years there may be a need for a new variant to encompass the ever growing world of unicorn companies.


Conclusion


To sum it up, when the idea of unicorn companies came about, the venture-backed startup world had no idea there would be so many. Every year their numbers increase exponentially, and there appears to be no stopping in sight. The majority of unicorn companies are in the tech industry, and provide services that change the game for users.



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