What is a unicorn Startup? – Meaning
Unicorn is a popular term used in the venture capital industry to refer to a privately held startup company that has reached a valuation of $1 billion. The term was introduced by venture capital investor, Aileen Lee, in 2013 to describe rare tech startups that were valued at more than $1 billion. Although the definition of a unicorn startup has not changed, the number of unicorns in India and the world has increased considerably.
The valuation of unicorns is not expressly linked to their current financial performance, but largely based on their growth potential as perceived by investors and venture capitalists who have taken part in various funding rounds.
Features of a unicorn startup
Although every unicorn startup is unique based on its idea and business model, there are some common features you can find in all of them. These include:
i) Tech-based
The core business model of many unicorn startups runs on technology. By leveraging the new technologies, unicorn startups manage to reach their customers faster and shorten the time required to achieve mass production.
ii) Privately owned
Privately owned startups in India have a greater chance of becoming a unicorn. It is because the company valuation grows when they receive funding from established investors – both Indian or global.
iii) Consumer-focused
Most of the unicorns are B2C companies. Their goal is to simplify and make things easy for consumers and be a part of their day to day life. Keeping things affordable is another key highlight of these startups.
iv) Disruptive innovation
Mostly, all the unicorns have brought a disruption in the field they belong to. Uber, for example, changed the way people commuted. Oyo rooms, for example, have changed the way people used to book accommodation while travelling and Snapchat disrupted the usage of the social media network etc.
Can only a startup be a unicorn?
The answer is yes.
Unicorn is a term given only to ‘startups’ who have a valuation of over a billion. The startups that exceed the valuation of $10 billion are grouped under the term called decacorn (a super unicorn). Dropbox, SpaceX and WeWork are some of the examples of decacorn.
Reasons behind the rapid growth of unicorns in India
i) Investors’ push for GBF strategy
Many investors and VC firms have adopted the GBF or Get Big Fast strategy with startups (also referred to as Blitzscaling) in India. Under this strategy, the startups aim to grow at a fast rate with large funding rounds and price cutting to dominate the competition in the market. The returns from this strategy are mostly favorable for all founders, investors, and even consumers.
ii) Company buyouts
Many startups become unicorns through buyouts from large companies (public) that focus on acquisitions to bolster their business instead of investing in internal developments.
iii) No plans for IPO
Startup companies often go through funding rounds to raise capital and their overall valuation. When in need of more capital, they follow the same route, i.e., asking investors for money instead of going through an Initial Public Offering (IPO).
iv) Easy access to technology
Most startups make the most of new technologies to win the race to obtain unicorn status. With easy access to tech-savvy consumers, startups gain the ability to expand the business beyond expectations.
Examples of Unicorn companies in India
Flipkart, Moglix, BharatPe, CoinDCX, upGrad, Groww, BlackBuck, Droom, OfBusiness, Meesho, Chargebee, CRED, Digit, Gupshup, Infra.Market, MindTickle, Five Star Business Finance, Innovaccer, Pharmeasy, Sharechat, Urban Company, Zeta etc…
At present India have listed 108 Indian Unicorn Companies till date.
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Note: This Post was last updated on November 24, 2022
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