Unicorns are all around us — unicorn companies, that is. Your favorite graphic design software or AI tool may just be a unicorn startup dazzling in plain sight.
The term unicorn refers to a company that‘s been given a shiny billion-dollar valuation, and the public can’t help but stare at these mystical creatures. Since the term‘s inception in 2013, they’ve attracted immense attention and praise; there's even a reality television show called Unicorn Hunters that capitalizes on this public fascination.
But, how common are unicorns, and are these successful startups as immortal as they seem? Let's disappear together into the enchanted forest and find out.
Learn more unicorn statistics in ourState of Global Unicorn Startups Report.
Table of Contents
- What is a unicorn company?
- Unicorn Company Traits
- How many unicorn companies are there?
- Unicorn Valuations
- Unicorns and Venture Capital
- Examples of Unicorn Companies
What is a unicorn company?
A unicorn company is a private company with a 1 billion dollar valuation. Privately owned companies are typically owned by a concentrated number of shareholders, unlike public companies traded on the stock market.
Unicorns are extraordinary creatures. Here are some quick statistics from our State of Global Unicorn Startups Report:
- The U.S. has the largest unicorn herd. While unicorns can exist anywhere in the world, the U.S. is home to more than half of the world's unicorn companies. China, the United Kingdom, and India follow.
- Technology companies possess a special magic. There are more than 2x the number of IT unicorn companies compared to other categories.
- A unicorn company isn't necessarily profitable. Only 1 in 6 unicorns have the necessary recurring revenue to go public.
- HubSpot is unicorn catnip. A rousing 22% of unicorn startups are HubSpot customers.
- Billion-dollar startups don't learn to sparkle overnight. On average, it takes nine years for a startup company to reach a 1 billion dollar valuation.
- Unicorns can lose their horns. Companies valued at 1 billion aren't guaranteed success (example: WeWork); almost 17% of unicorn startups lose their unicorn status or fail.
The term “unicorn company” was coined by Aileen Lee, venture capitalist and founder of Cowboy Ventures, in 2013. It was introduced in her now-famous TechCrunch article "Welcome To The Unicorn Club: Learning From Billion-Dollar Startups."
Unicorn Company Traits
What ingredients go into a private company valued at a billion dollars? A teaspoon of magic, a cup of rainbows, and a dusting of glitter? While there's no exact recipe for a unicorn company, there are some common themes that we see many unicorns embody.
Disruption
The term disruption in the business world refers to smaller companies challenging an industry. While it sounds negative, you're happily using disruptive technology right now. Personal computers and smartphones are just two examples of new market disruptions.
Some examples of disruptive unicorns include:
- ByteDance (owner of TikTok), disrupted the social media industry.
- Uber, disrupted the taxi industry.
- Airbnb, disrupted the hotel industry.
New Technology
Behind almost every unicorn startup is research, innovation, and new technology. This backbone isn't surprising given that 3 of the top 10 unicorn categories are software (#1), pharmaceuticals and biotechnology (#7), and healthcare technology systems (#8).
Learn more unicorn statistics in ourState of Global Unicorn Startups Report.
Some examples of unicorns that are developing innovative technology are:
- OpenAI, the company behind ChatGPT.
- SpaceX, an American aerospace manufacturer.
- Rivian, an electric vehicle manufacturer.
Growth Opportunities
High valuations reflect excitement about a company's potential growth opportunities. In the startup world, growth often looks like a scalable product that can have global reach.
The importance of growth explains why technology companies are so overrepresented in the unicorn herd. Technology is the easiest product to scale. Without the hurdle of physical product distribution, tech startups that serve a universal need can distribute their product globally through one central headquarters.
Some examples of companies that have scaled massively are:
- DoorDash, a personal-use home delivery app.
- Tinder, a dating app.
- Notion, a digital workspace.
Public Use
Public use ideally means that a company can serve a large target audience. While almost no product will serve literally everyone (even Google has boycotters), a large target audience can create more opportunities than a small niche.
Naturally, some success stories contradict this. Palantir Technologies is often listed as a top-ten unicorn company, but with the tagline “A New Age of Technology, Warfare, and Deterrence,” it‘s clear that this technology isn’t exactly as accessible to the public as Netflix or Airbnb.
Here are some examples of companies that capitalize on universal public interests:
- Epic Games, a video game developer.
- Grammarly, a writing assistant software.
- Reddit, a social media platform.
Visionary Leadership
What do venture capitalists look at in unicorns? The founders.
“Unicorn founders are exceptionally great at learning quickly, making decisions, being persistent, and sharing a compelling vision for the future,” shares Erik Lim, founder and GP of Potluck Ventures. Erik Lim's venture capital firm has invested in 5 unicorn companies to date.
"The combination of these qualities enables them to effectively build, iterate, recruit, fundraise, close customers, and scale,” Lim says.
Some examples of unicorn companies with visionary leadership include:
- Canva, a graphic design software.
- Pinterest, a visual search engine.
- Liquid Death, a canned water company.
Do you have a startup idea? Come see if HubSpot Ventures can help you bring it to life.
How many unicorn companies are there?
An exact number of unicorn companies can‘t be calculated, but it’s estimated that there are about 1,500 companies with unicorn status. PitchBook lists 1,369 active unicorns on their unicorn tracker. Crunchbase counts 1,518 active unicorn companies.
In an interview with Fortune in January 2024, Aileen Lee said it's impossible to know the exact number of unicorn companies because of geography and disclosure issues. “We’d love to use revenue, but nobody’s disclosing revenue," Aileen Lee told Fortune.
From 2013 (when Aileen Lee coined the term) to 2023, the unicorn club grew 3,026% in size, from 39 unicorn companies to a reported 1,219 unicorns. However, Aileen Lee told Fortune she expects numbers to decrease by more than 30%.
Companies losing unicorn status isn't new. The other side of the unicorn coin is unicorpse, referring to a company that once held unicorn status but has lost significant value.
This is just the tip of the spin-off jargon iceberg; minicorn, decacorn, and hectocorn are a few other terms inspired by Aileen Lee's “unicorn” coinage.
Unicorn Valuations
With a unicorn's horn hinging on the coveted billion valuation, it's important to understand where that number comes from.
“Unicorn valuations come from evaluations and analysis conducted by venture capital firms and investors that review revenue and business models compared to the opportunities and growth of the respective markets/industry,” said Doug Applegate, the Associate Director of Purdue Incubator.
Doug Applegate has over 15 years of experience and skills in startup accelerators and incubators, venture capital, and partner/sponsor development. He shared these insights on the differences between unicorn valuations and unicorn stock valuations:
“Unicorn startups, typically privately held, often issue preferred stock to investors and venture capital firms, unlike the common stock traded in public markets post-IPO. The transition from private to public or acquisition status leads to the loss of unicorn classification; for instance, Uber and Dropbox ceased to be unicorns upon their IPOs. However, both privately held and publicly traded companies exceeding $1 billion in valuation are rare entities and are often regarded as highly successful."
Some of the unicorn examples listed above (Airbnb, Uber, and Pinterest, to name a few) fall into this post-unicorn category.
Unicorns and Venture Capital
What’s the relationship between unicorns and the venture capital industry? Venture capitalists are investors who specialize in startup companies.
"A venture capitalist, or VC for short, can specialize in numerous different industries and specific stages of company development, but what connects them is that venture capitalists are a driving force behind the valuation of companies," says Jordan Meier, venture capital associate and founder of the venture capital firm Uni Syndicate.
"If a startup wants to raise money, they'll often go to a VC because they command large amounts of cash, can provide valuable connections, and both understand and anticipate the risks that come with investing in startups,” Meier notes.
How can you invest in a unicorn company?
Meier says that you may already have a stake in one. “Many pension funds, university endowments, and insurance companies invest in Venture Capital funds. By proxy, the economic gain of startup unicorns will carry over to you in a very small way.”
For individual investors who are interested in taking a more active role in investing in unicorn startups, Meier warns that even though there's a lot of capital sloshing around, unicorns are a statistical rarity.
"Startup investing is exceptionally risky, and nine out of any 10 venture capital investments are complete losses. Diversification of startup investments is highly encouraged, but even with that, there is no guarantee they will make any money at all, let alone find a unicorn,” Meier says.
Still curious about making an investment in one of these businesses? Jordan Meier shared this advice for eager private investors.
Invest in an actively managed venture capital fund.
A fund manager will be put in charge of finding, conducting due diligence, and placing funds into a large number of diversified startup companies.
A vast majority of unicorn companies will receive some sort of venture capital investment. This will be reserved for accredited, high-net-worth individuals who are willing and able to invest hundreds of thousands to millions of dollars at a time.
Become an Angel investor or join an Angel investing syndicate.
You can individually (or as part of a group) find companies to invest in, conduct diligence, and distribute your funds to startup companies. You have the ability to pick and choose which companies you would like to invest in on a deal-by-deal basis.
This is reserved for accredited investors, but the dollar amount per company is usually much lower, as low as $1,000 per company.
Invest through an equity crowdfunding website.
Websites like Republic offer startups the opportunity to raise capital directly from individuals. You do not need to be an accredited investor, and you can invest with as little as $100. It will be harder to find a future unicorn at this level, but given the lower capital required to enter, you do not need to invest in a unicorn to see a good return on your investment.
Examples of Unicorn Companies
Don‘t feel bad if you’re brand new to the venture capital world. I‘m going to show you some of the most well-known unicorn startups, and you’ll be pleasantly surprised to see that you're already acquainted with some of these enigmas.
OpenAI
Billion-dollar startups are born all around the world and can exist in any industry, but if technology and Silicon Valley are popping into your head, it‘s for good reason. That’s the exact intersection where OpenAI was born in 2015.
OpenAI is perhaps the most talked about technology company after it released ChatGPT in November 2022. OpenAI was founded by Elon Musk, Sam Altman (current CEO), and several others in San Francisco. Some of its key qualities are:
- Market dominance. While there are other AI products on the market, OpenAI cemented its position as a leader in this space.
- Company leadership. With Elon Musk as an investor and a collaboration with Microsoft, there's a lot of established, influential people offering guidance.
- New technology. OpenAI did something that few startups can say: they created a product that changed the world.
Canva
Canva is one of the happiest parts of the internet, where anyone can make their dreams (or Christmas cards, business cards, or iPad wallpapers) come true. Founded by Melanie Perkins in Australia in 2013, Canva is a graphic design software for normal people, available at a normal cost.
Those too young to remember the pre-Canva days won't believe how much money businesses paid graphic designers to do minuscule design tasks, like creating basic icons. Graphic design was a skill guarded by expensive and difficult-to-learn software. What started as a bootstrapped dream grew into software used in 190 countries when it got its 1 billion valuation in 2018. Some of Canva's key qualities are:
- Innovation. The thought of anyone being able to do graphic design was a revolutionary idea when the market was so dominated by Adobe's advanced products.
- Adaptability. Canva initially focused on yearbook design but pivoted two years into business to focus on the uncapped general market.
- Constant refinement. Founder Melanie Perkins said that her vision with Canva was to “build the world’s most valuable company." Every Canva user (and isn't that all of us?) can attest that the platform is constantly refining features, streamlining the interface, and improving the platform.
Vinted
We all know that the under-loved clothes in our closets are worth money; one woman put the solution to this shared desire in our pockets. Founded by Milda Mitkute in 2008, Vinted is Lithuania's first unicorn company. You could say that Vinted is like eBay but cooler and easier to use.
When I was getting rid of all of my stuff to go traveling in 2023, I turned to eBay to sell worthwhile items. I trusted the platform, but it was somehow a headache. I Googled a beginner's guide to reselling on eBay and eventually stumbled across an ad for Vinted, where I was hooked.
Vinted felt modern, made by someone closer to my age with intentionality. Here are some of Vinted's key qualities:
- Disruptive. The online secondhand market was undeniably profitable, but users had complaints. Vinted solved them.
- Universality. The desire to make money from unworn clothes transcends social groups and income classes.
- Momentum. Vinted leadership has said that they saw massive growth in 2016 after improving the user experience. The company got its 1 billion valuation in 2019, and says that they're still only at the beginning of their journey.
Liquid Death
“Murder your thirst.” It‘s a slogan that you only need to hear once to remember forever. That’s the catchphrase of Liquid Death, a startup that achieved a billion valuation in March 2024, a company that's done the seemingly impossible: turn water into a billion-dollar product.
Liquid Death was founded by Mike Cessario in 2017 and is currently headquartered in Los Angeles. The product is simple: water sold in a tallboy aluminum can. Yep, someone managed to finally make water cool. Some of Liquid Death's key qualities are:
- Marketability. Founder Mike Cessario told Inc. that he aimed to create a product that marketed itself by being photogenic enough that users included it in their social media content.
- New market. Mike Cessario designed Liquid Death to have a “party-drink look” so that it could be consumed at a bar without anyone noticing it was just water.
- Awareness of consumer concerns. Liquid Death doesn‘t take itself seriously, but it does speak to a serious consumer concern: the impact of plastic packaging (water’s typical housing). It instead uses aluminum, citing its sustainability.
Finding Billion-Dollar Startups
Who will become the newest member of the unicorn club? Private market investors will continue hunting, and startup founders will keep innovating and dreaming of joining the herd.
Unicorns may seem distant and mystical creatures, but given that 22% of unicorns use HubSpot, you have something in common with these companies just by being here.
Learn more unicorn statistics in ourState of Global Unicorn Startups Report.