Launching a unicorn startup. It’s the stuff of legends.
When venture capitalist, Aileen Lee, coined the term back in 2013 — referring to a private company valued at or over $1 billion — these startups were akin to the mythical creature. A statistical rarity. Back then there were only 39 unicorns on her first count. Fast forward six years and there’s a new unicorn born every four days. Talk about a funding fantasia.
Naturally, many entrepreneurs dream of joining the herd and becoming a household name like Uber or Airbnb. But don’t be fooled. It takes a talented and dedicated team to rise through the ranks, especially when you consider the failure rate of U.S. companies is over 50% after five years and 70% after the ten-year mark.
To help entrepreneurs better understand unicornland and how to model a startup, Embroker put together this guide that dives in the unicorn ecosystem, using data to highlight factors like geographical placement, the time it takes to become a unicorn and lessons from herd leaders that you can then apply to your startup.
Develop a meaningful, ownable value proposition.
Every successful business needs a solid value proposition — the benefit you provide to the people who pay for your product or service. Your brand should have a benefit that is clearly important to the marketplace and solves for a problem customers didn’t know they had.
Entrepreneurs need to establish a powerful value proposition that not only differentiates their company from marketplace competitors, but also makes it easy for their target customer base to understand.
Know when to pivot.
In other words, be ready to relentlessly evolve your value proposition. Simply put, the law of the marketplace is that companies must adapt or face extinction, so your value proposition should grow and expand to reflect both internal and external developments. Understanding industry trends, innovating your product or service and staying ahead of the game are all ways to know when it’s time to pivot.
Know Your Industry
When you break down leading unicorns, there’s a pretty clear pattern in which industries dominate the herd — the bulk existing in four different spaces: fintech (12% of all unicorns), eCommerce (11%), internet software (9%) and on-demand (6%).
Now, this doesn’t mean you’re doomed to find funding outside of these industries, but what it does mean is that many investors focus on them looking for a big opportunity. That said, a valuable idea doesn’t have to exist in one of these four categories. Startups have flourished in industries ranging from like 3-D printing and entertainment to HR tech and even tech for kids and babies.
If you want to make sure you’re betting on the right horse, here are some important industry factors to consider when building your startup.
- Your expertise
- Projected industry growth
- Regulatory environment
Choosing which industry your startup will reside in is not a decision to be taken lightly. It’s important to focus on the long-term, or you might enjoy success for a few years followed by a decline.
Now location isn’t everything, but it’s very important. A decade ago, nearly all unicorns had founding headquarters in the U.S. Fast forward and only 44% are U.S.-based, 37% have headquarters in China and 19% spread throughout the rest of the globe.
While these days, unicorns can be born just about anywhere, it’s still helpful to situate your startup in a place where venture capital is ripe. After all, there’s a reason why many startups have set up shop next to Wall Street bulls, in innovative hotbeds like Silicon Valley and tech hubs like Seattle. This is where the majority of big checks are written.
To dive further into the geographic placement of startups, the time it takes to become a unicorn and tips from from startup founders like Brian Chesky of Airbnb or WeWork’s Adamn Neumann, check out this interactive guide on unicorn startups.