The chances of becoming a unicorn stand at one per cent: But here is how to become one

The mood in Silicon Valley, and similar tech hubs across the globe, is a “little crazy” right now, Goldman recently pointed out, highlighting to a recent wave of company valuations, IPOs and deals.

“They talk about unicorns – companies valued at over a billion dollars,” he added, employing a term that refers to tech startups that reach a $1bn market value. 

Let’s face it, investors are probably kept up at night thinking about such companies. As coined by The Social Network: “A million dollars isn’t cool. You know what’s cool? A billion dollars.”

According to Jeremy Levine of Bessemer Venture Partners, if you invested in every one of the ten next best VC investments, but you miss a Facebook or a Google, the next ten don’t add up to even one of a Facebook or a Google. He would know – He missed out on Facebook.

But what are the chances of an early-stage company really achieving such a status? After all, unicorns are rare and mythical creatures! 

With 108 unicorn companies in existence today, you’d expect the concept to be far more common. However, according to research from CB Insights, the odds of a company becoming a unicorn today is only 1.28 per cent. 

In fact, First Round Capital partner Josh Kopelman seems to think fewer companies are hitting the public market. He went on to say that the longer companies stay private, the less we really know how viable each really are. 

This “private IPO phenomenon,” he said, allows companies to grow without the regulatory restrictions. However, good-quality unicorns may become an endangered species because of it.

“If there is one thing we can learn from the public IPO market, it’s that our industry isn’t always very good at pricing large companies,” Kopelman said. 

Undoubtedly, however, entrepreneurs want what any average child could only dream of: to become a unicorn. We’ve gathered that it’s not an easy task, but we tamed a few mythical creatures part of the allusive “Billion Dollar Club” and asked them for advice.

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Step one is, obviously, growing the horn. It’s most likely the hardest part of the transformation given that growing such a protrusion from your head will not be magic and sparkles. From there on, we leave it up to the experts to explain.

“In Pure’s case, we tackled the $100bn enterprise data-storage market, in which the dominant product architectures are two decades old, and customer satisfaction with the legacy products is well below average,” said Scott Dietzen, CEO of Pure Storage.

Essentially, don’t stick to the same pastures as the other horses. After all, you’re unique, you have a horn! This was echoed by Zulily CEO Darrell Cavens, who explained that becoming a unicorn often involves ignoring the naysayers. 

Next, “identify a disruptor that changes the game on the market incumbents and craft a recipe for disruption that others will strive to copy”, Dietzen said. Similarly, Waze, a traffic and navigation app, reached its unicorn status in much the same way.

“Waze was a strong challenger of the traditional model of traffic analysis because we relied entirely on input from the community, not from road sensors or street cameras,” added Julie Anne Mossler, head of global communications and creative launch strategy at Waze.

Ultimately, you need to drive major decisions and product development to meet the needs of your customers.

“You need hugely delighted customers,” Dietzen said. “Customers can and should be your strongest advocates. They should teach you about the value that you’ve delivered to them.”

Cavens explained that you need to have an open mind about how customers respond to products and what they do with it. It may lead your business in an entirely different direction.

Another crucial step is to find the right investors for the business.

“Fundraise before you need the money,” Dietzen claimed. “That ensures you have the opportunity to weigh alternative investors to ensure the best fit in terms of culture and long-term aspirations. You should strive to avoid investors that will want to sell, and find the ones that are in it for the long haul.”

By Shané Schutte

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