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Unicorn company definition
Unicorn is a privately held startup company valued at over one billion dollars.
Terms such as “unicorn in business” or “Unicorn startup ” refer to companies classified as startups under private holding and have obtained a valuation equivalent to or higher than one billion dollars. This term was first developed in 2013 by Aileen Lee, a world-renowned venture capitalist. She decided that the term unicorn was the perfect choice to represent these types of startup ventures that were highly successful since unicorns are known as a rare species.
Aileen Lee
When the famous Aileen Lee used the term unicorn for these startup companies, it was realized that only thirty-nine such companies could be classified as unicorns. Other research indicated that startups that had commenced from 2012 to 2015 were experiencing valuation growth at a rate two times faster than businesses that had started from 2000 to 2013.
- High-Value Startups: A unicorn startup is a privately held cat $1 billion.
- Term Origin: Venture capitalist Lee coined the term “unicorn” in 2013 to represent the rarity of such startups and privately owned companies.
- Capital Backing: Unicorns typically receive significant investment from venture capital firms, driving their high valuations.
- Tech-Focused: Most unicorn startups are in the tech industry growth, leveraging innovative technologies to disrupt global markets.
- Rapid Growth: These startups usually experience rapid growth in short funding, quickly supplying their market reach and customer base.
- Global Presence: Many unicorns operate globally, entering multiple markets to achieve high valuations.
- Market Disruption: Unicorns often disrupt existing industries by offering new solutions or business models, changing how consumers or businesses operate.
- Potential for IPO: While still young, precursors are often candidates for an initial public offering (IPO) or acquisition by larger companies.
Number
Once 2018 arrived, sixteen companies within the United States of America gained the classification of unicorn status. This resulted in the presence of one hundred and nineteen privately owned companies with a valuation of one billion dollars or more on a global scale. This was impressive, indeed.
Here’s a list of some notable unicorn companies, along with brief descriptions:
1. SpaceX
- Industry: Aerospace
- Valuation: Over $137 billion
- Description: Founded by Elon Musk in 2002, SpaceX designs, manufactures, and launches advanced rockets and spacecraft. The company aims to reduce space transportation costs to enable the colonization of Mars. SpaceX’s achievements include the first privately funded spacecraft to reach orbit and the first reusable rocket.
2. Stripe
- Industry: Fintech
- Valuation: Over $50 billion
- Description: Stripe provides a suite of payment processing software and application programming interfaces (APIs) for e-commerce websites and mobile applications. Founded by Patrick and John Collison in 2010, Stripe is widely used by businesses of all sizes to accept payments, manage businesses online, and prevent fraud.
3. ByteDance
- Industry: Technology/Entertainment
- Valuation: Over $300 billion
- Description: ByteDance is a Chinese multinational internet technology company best known for creating the popular social media platform TikTok. Founded in 2012 by Zhang Yiming, ByteDance uses machine learning algorithms to curate personalized content feeds and has expanded into various other tech areas, including AI and news aggregation.
4. Shein
- Industry: E-commerce/Fashion
- Valuation: Over $66 billion
- Description: Shein is an online fast-fashion retailer headquartered in China. Founded in 2008 by Chris Xu, Shein is known for its affordable, trendy clothing, which targets a global market. The company utilizes data-driven product design and a highly efficient supply chain to respond quickly to consumer trends.
5. Revolut
- Industry: Fintech
- Valuation: Over $33 billion
- Description: Revolut is a UK-based fintech company offering digital banking services, including international money transfers, cryptocurrency exchange, and stock trading. Founded in 2015 by Nikolay Storonsky and Vlad Yatsenko, Revolut aims to disrupt traditional banking with its app-based platform and competitive exchange rates.
6. Robinhood
- Industry: Fintech/Investment
- Valuation: Over $7 billion
- Description: Robinhood is a commission-free trading platform that allows users to trade stocks, options, and cryptocurrencies. Founded in 2013 by Vlad Tenev and Baiju Bhatt, Robinhood aims to democratize finance for all, making it accessible to a broader audience. The app gained popularity, particularly among younger investors.
7. Databricks
- Industry: Software/Big Data
- Valuation: Over $43 billion
- Description: Databricks provides a unified analytics platform that allows data engineers, scientists, and analysts to collaborate and perform large-scale data processing and machine learning. Founded in 2013 by the creators of Apache Spark, Databricks aims to simplify big data and AI workflows, enabling faster innovation.
8. Klarna
- Industry: Fintech/Payments
- Valuation: Over $6 billion
- Description: Klarna is a Swedish fintech company offering “buy now, pay later” services, allowing consumers to make purchases and pay for them over time. Founded in 2005 by Sebastian Siemiatkowski, Niklas Adalberth, and Victor Jacobsson, Klarna has become one of Europe’s largest banks and provides payment solutions to over 90 million consumers worldwide.
9. Canva
- Industry: Technology/Design
- Valuation: Over $25 billion
- Description: Canva is an online graphic design platform that allows users to create social media graphics, presentations, posters, and other visual content. Founded in 2013 by Melanie Perkins, Cliff Obrecht, and Cameron Adams, Canva simplifies non-professional design, offering a drag-and-drop interface and a vast library of templates.
10. Epic Games
- Industry: Gaming
- Valuation: Over $31 billion
- Description: Epic Games is a video game and software developer known for creating Fortnite and the Unreal Engine, one of the most popular game development platforms. Founded in 1991 by Tim Sweeney, Epic Games has become a significant player in the gaming industry, with its Unreal Engine powering many of today’s leading games.
These companies represent various industries, including technology, finance, fashion, and gaming. Each has achieved unicorn status through innovative business models and rapid growth.
Grow fast strategies
It appears that venture capital agencies and investors are prone to adopt fast growth strategies when implementing startups at this time. This strategy applies the effort of startups to expand quickly via enormous funding supplies and lower prices to achieve a large portion of the market share and beat off the competition as quickly as possible. The exponential returns are comparatively fast from us, which is a strategy to please all stakeholders. On the other side of the spectrum, it cannot be denied that unicorns can attain the exemplary of preceding sustainability in creating value for an extended period, which can happen to online companies over time.
Buyouts
Many unicorns were formulated when buyouts were performed through publicly held large companies. Companies with slow growth and low interest rates tend to concentrate on acquisitions rather than developing projects for internal investment opportunities or capital expenditures. Some larger companies prefer to pep their companies by purchasing other businesses, and technology businesses do not need to be established instead of engaging in their efforts.
Private and public holding
Before a technology company transfers to being held by the public, it is usually under private holding for approximately eleven years compared to four years, as was a trend in 1999. Another contributing factor is based on the implementation of The US Jumpstart Our Business Startups Act, which was orientated in 2012. This act allowed the augmentation of the number of assets a company could possess as much as four times before it needed to disclose its financial records to the public. Thus, it is indicated that there was a three-fold increase in private capital for investment purposes for software businesses from 2013 to 2015.
Access to more rounds of funding
Because of the implementation of several rounds of funding, businesses do not need to engage in the initial public offering, abbreviated as IPO, to have access to capital or achieve a valuation at a higher level. The companies can resort to relying on their investors for increases in capital. There is also the risk that IPOs may cause a devaluation of the business when the public perceives that the company has a valuation lower than investors believe. When the public market does not agree with a company’s valuation, the price for each stock can decrease, depending on the initial range of the IPO.
Avoiding hassles
Furthermore, startups and investors do not have a strong desire to address the hassles associated with going public due to the more extended periods when doing so. Take into consideration, for example, regulations such as the Sarbanes-Oxley Act. As a result, many private companies participated in long-term development-savvy
Startups are further engaging in being savvy to take advantage of the influx of new technology within the past ten years to achieve unicorn status quickly. With the eruption of social media and the fact that millions of people are engaging in such technology to access massive global markets, startups can expand their companies much more rapidly than in former times. With this being the case, it cannot be denied that unicorns have experienced much growth due to innovations in P2P platforms, mobile smartphones, social media applications, and cloud computing.
Deriving valuations
In terms of valuations that allow startups to achieve unicorn status, such valuations are considered unique compared to companies that have been established for a more extended period. Hence, the valuation of a company established for quite a while is based on the premise of the company’s performance over the past years. On the other hand, the valuation of a startup company is based on the potential opportunities for growth and the anticipated long-term development.
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