How to become a unicorn startup in 2020: 5 key points for your success
Growing a “unicorn startup,” which means a startup from a technology industry that has reached a value of $ 1 billion or more, has already ceased to be something mythical and mysterious. This is a very feasible process and there are quite specific steps and recommendations to achieve this result. It goes without saying that becoming the owner of such a “horse” seems to be even more attractive, especially regarding an increase in their number over the past few years.
According to CB Insights, currently there are 260 projects in the world, the cost of which exceeded the estimate of $ 1 billion and turned them into "unicorns."
A unicorn startup can be created in any country, however, to date, North America is the world leader in the emergence of “unicorns,” followed by Southeast Asia and Europe. The number of unicorns in Israel is growing rapidly, with more than 20 companies worth $ 1 billion.
The process of becoming a unicorn is a technological and thoroughly structured task. To solve it, the project founder must act according to a clear strategy. In this article, we will present you some useful tips and advices on unicorn breeding!
1. Choose an industry
About 40% (103 startups) of current unicorns are concentrated in five sectors: data collection and analysis, fintech, healthcare, software development and Internet services, on-demand services.
The largest number of unicorns is in the field of software and online services (15%), followed by electronic commerce (14%) and fintech (12%). In e-commerce, the most expensive company is the Meituan Dianping, among online services - the technology provider Infor ($ 10 billion) and Slack ($ 9.4 billion), the Chinese online finance market Lu.com - the most expensive fintech startup ($ 18, 5 billion).
In the service sector, 19 unicorns are estimated at a total of $ 170 billion, with Uber and Didi prevailing among the leaders.
In addition, there are a number of unicorn startups in real estate, renewable energy, and the aerospace industry, CB Insights notes. Here, for example, companies such as SpaceX and the new investment of Uber co-founder Travis Kalanick - a startup specializing on the sale of real estate Opendoor - are represented.
This does not mean that there is no financing in other areas, writes Inc. Here are just a few areas where startups grew into unicorns - clothing, entertainment, music, computer games, devices for small and infant children, 3D printing. Choose what you like best, but remember that usually “unicorns” grow out of actively developing niches, such as the IT industry, where new large segments are constantly appearing.
2. Create your own unique technology
You will not be able to grow a unicorn acting on already prepared patterns. In order to achieve such heights, you must have something truly unique, not seen before. In other words, you either need to create something yourself with an estimate of $ 1 billion worth, or find a team of professionals who will help you with this task. Moreover, not every company can decide to create a completely original custom product and go through the whole startup growth cycle. Nevertheless, some recommendations for finding such a company you can learn from our article How to choose software development company for a startup.
3. Attract an investor
Many unicorn companies reached the first million revenues without venture capital investments. But to get to the billion mark, almost everyone collected venture capital investments from global investment funds. Contrary to the aspirations of entrepreneurs to get large investments from funds at the initial stage, most unicorn companies at the time of the foreign investments' first round had $ 1-10 million in revenue.
In order to get into the club of “unicorns”, the founder needs to understand what goals and objectives the potential investors pursue, or to have consultants who understand this. The interest of “angel” investors and seed investment funds participating in the seed and pre-seed stages, among other things, is to convince the creators of the project to give the maximum share for the minimum money. This is done to get the maximum income for the most risky stage of the investment cycle. Do not forget about it.
Creating a scalable product is the key to becoming big enough to be called a unicorn. At first, you most often focus on one country or even a city, but your startup should have a structure that will allow it to grow around the world. Fortunately, IT technology makes it easy to scale startups.
Remember the main thing - if your business can help people or other businesses solve a number of important problems, it will have significant growth prospects. The better the growth prospects, the higher your future potential income and so the estimated value is. A product with limited benefit for customers will not receive a high rating, as it implies a more limited size. Proceed from these recommendations and be prepared for rapid growth.
5. Assemble a team
This item is the first thing investors are looking at. It is advisable that the people in the team already have a number of successful projects behind them, not only in creating products, but in building companies.
You should always remember that the idea of a startup costs zero in the world of venture investors. They are only interested in whether your team will be able to transform the idea of the project into real product.
Your team will have to face new problems every month, or even daily, and their number will constantly grow. A team will be able to cope with this, where people of the opposite character and qualities are united, who are sincerely devoted to the idea, are most involved in the project and have the proper expertise.
Only a few manage to keep together a team where everyone understands their responsibility for the performance of tasks and does not abandon the project in the middle of the difficult path of building a unicorn startup.
It is necessary to create and maintain the general confidence of all team members that it is safe for the company to take risks, that no team member will be punished for asking a question or proposing their idea.
Unicorn startup examples
Wherever the users are and whatever device they use, Uber is always ready to deliver them to the right place. To call a taxi with the Uber application, you can use a smartphone, a fitness tracker, and even a smart watch. Now Uber is almost everywhere, despite the fact that its business model is difficult to scale. The driving force behind this rapid growth is investment. Even Google has invested in this startup.
Uber provides cheap and fast service and creates a win-win situation for both passengers and drivers. Thus, the main components of the success of Uber are: a professional team, a long-known and working idea, which was presented in a new form thanks to modern technology, rapid growth and regular funding.
GitLab is a collaboration platform and DevOps. Mostly it is needed for developers - so they can easily and conveniently work with common code and its versions from around the world. The main competitor of the startup is GitHub, which has been owned by Microsoft since 2018.
In four years, the company raised more than $ 400 million - from $ 1.5 million in 2015 to $ 268 million in September 2019. Among the investors are Khosla Ventures, Google Ventures, Y Combinator, Goldman Sachs. GitLab is used by over 100,000 organizations. Among them are Qualcomm, NASA, Nasdaq and even Interpol.
Each country has its own online platform for posting rental apartments. Although, when you travel abroad and do not know which platforms are reliable in a particular country, you are faced with the problem of how to find cheap housing for a couple of days. Airbnb has succeeded in creating a reliable global rental platform. Everyone who wants to rent an apartment through Airbnb, is sure that they will have a place to sleep. The startup has a simple business model based on commissions, a popular service and an easily scalable structure. These three components form the reason for the success of this unicorn.
Behind any unicorn application there is a useful service that makes life easier for people. In the era of globalization, you can even combine all existing ideas together and create a fundamentally new solution on their basis. Remember, becoming a “unicorn” is difficult, but not impossible, and one of the keys to success is the presence of a good tech professionals who will help with planning and further implementation.