While becoming a unicorn is what almost every startup founder dreams of, few truly understand how to get there or what it all entails.
The term “unicorn” is treated like a badge of honor for good reason.
Getting a privately held company to a billion dollar valuation is no small feat, and those who have succeeded should take due pride in their accomplishment.
What most don’t realize is that there’s a lot more at stake beyond the billion-dollar valuation than financials.
More often than not, unicorn status comes with unique challenges such as lofty revenue expectations and challenging boardroom dynamics that influence the trajectory of the company in ways both subtle and much less so.
Join us below as we explain what unicorns are, what it takes to become one, and explore what getting to unicorn status means for those who succeed in the task.
Unicorns: The Stats Behind the Dream
Let’s begin with some context. As of 2024, there are approximately 1,250 unicorns globally according to CB Insights. The term itself is barely a decade old with Aileen Lee coining the term in 2013 to represent these rare, mythical creatures in the business world that she felt have an almost magical quality to them.
Over the past ten years a long period of low interest rates and a paradigm shift in the tech sector led to the unicorn club burgeoning and swelling, but the label remains a needle in the haystack as Lee aptly called it.
Most unicorns are to be found in the tech industry, with the U.S. and China leading the charge. Dealroom estimates that the majority of today’s unicorns are concentrated in areas like enterprise tech, fintech, healthcare and marketing. Most unicorns today are located either in the Bay Area or New York.
What Exactly Is a Unicorn?
In simple terms, a unicorn is a privately-held startup valued at over $1 billion.
Companies like Uber, Stripe, and Airbnb are classic examples of unicorns; companies that hit the right sector with a disruptive product at the exact right moment. That’s not to say that all unicorns need to be household names.
In fact, most unicorns are entirely unknown to the mainstream audience, with many working deep within enterprise and financial system with a B2B model.
What all unicorns have in common is that they have captured the attention, and wallets, of venture capitalists who see sky-high potential in the business.
The valuation itself can be justified based on a wide variety of factors, including growth and innovation potential or existing revenue pipelines. In the end, all that is needed for unicorn status is someone to invest in the company’s shares at a price that brings the total capitalization to $1 billion.
For example, Stripe reached unicorn status when a Series C funding round valued the payment processing company at $1.75 billion in 2014, despite still being a relatively young company at the time. Their rapid growth potential and market disruption attracted enough investor confidence to push their valuation over the billion-dollar mark.
How Do You Become a Unicorn?
There’s no formula for becoming a unicorn, but there are some common factors that we can identify.
For starters, most unicorns are solving big problems in large, scalable markets that are either untapped or ripe for disruptive new ways of doing business.
They’re built for taking advantage of a market that offers fertile grounds for rapid growth either on purpose or by lucky coincidence, and they know how to tell a compelling story to investors about their potential. Here’s what you’ll need at a minimum:
- A scalable model: Unicorns don’t just have a great product; they have a business model that can scale globally. Think Uber, Airbnb, or Stripe—businesses designed to grow exponentially.
- Disruptive technology or a novel approach: Unicorns typically disrupt existing markets or create entirely new ones. Look at what Robinhood did for stock trading or what Tesla did for electric vehicles.
- Exceptional leadership: Unicorn CEOs need to be visionary leaders who can manage rapid growth and attract top talent. It’s not just about having a great idea; it’s about executing it at scale.
- The right story: Life is far from fair, and having the best product means nothing if you can’t persuade others to believe in it. Building the right story that mixes growth potential and executional prowess is key for getting the right investors to open up their wallets.
- The right timing: Unicorns are made only when the market is ready to mint them. Timing plays a critical role in whether or not an idea can take off, and whether investors are keen to fund it. For example, Zoom soared to unicorn status as remote work became essential during the pandemic, perfectly aligning their solution with a massive market need and an ideal interest rate environment.
What Changes When You Become a Unicorn?
Hitting unicorn status does more than just confer a sought-after label. For better or for worse, being labeled as a unicorn can shift your company’s entire trajectory, not least because of heightened levels of investor expectations and control.
Unicorns can expect increased scrutiny, not just from investors but also from competitors, regulators, and their consumer base. Suddenly, the founder’s every move is under the spotlight, and the expectations are sky-high.
Leadership, and what the company demands of its CEO, changes too.
If you’re leading a unicorn, you’re not just the scrappy startup founder anymore—you’re now seen as the CEO of a billion-dollar company, with all the responsibility, pressure, and visibility that comes with it.More often than not, you also have a board filled with investors keen to see you adding multiples to your already enviable valuation again. VC money is not known to be particularly patient, and some board members may need to start delivering sizable results as early as within the first two to three years.
In many ways, becoming a unicorn is like stepping on a treadmill, with each success begetting a greater appetite for even more. One of the key challenges unicorns face is avoiding the growth at all cost trap, which can help meet investor expectations but can come at trade-offs that make the company less sustainable in the long term.
There are plenty of positives to becoming a unicorn too.
A billion-dollar valuation opens doors that simply weren’t accessible before and it becomes easier to attract world-class hires, form strategic partnerships, and build credibility in your market. But it’s also important to remember that with these advantages come greater demands—and navigating this new level of responsibility requires more that most CEOs might have anticipated in advance.
The Positives and Negatives of Becoming a Unicorn
Positives:
- Recruiting talent: Top talent is drawn to unicorns for both the prestige and the potential financial rewards of joining a rapidly growing company.
- Market credibility: Becoming a unicorn puts you on the map, giving you an instant credibility boost with customers, partners, and media.
- Access to capital: Unicorns often have an easier time raising additional rounds of funding, attracting top-tier investors who want to be part of the next big thing.
Negatives:
- Sky-high expectations: With that big valuation comes enormous pressure to deliver—and fast. Growth expectations can sometimes lead companies to make risky decisions.
- Dilution of control: As you bring in more investors and raise larger rounds, you might find your control diluted, with more voices and interests at the table.
- Public scrutiny: Once you’re a unicorn, you’re always on the radar. If you fail to keep growing at the anticipated pace, the fall from grace can be swift and brutal.
Being a unicorn brings more than a label others would die for. Knowing what you’re up against is only part of the journey, and those who are ready to take the leap would do well by doing their due diligence on what becoming a unicorn ultimately entails.