How to Build a Unicorn ? People, Process or Technology?
Startups are more than just a buzzword and have grown to become highly respected and valued. Any privately-owned startup that has a valuation of over $1 Billion is regarded as a unicorn. The term unicorn was coined by the venture capitalist Aileen Lee who likened the rarity of the mythical animal unicorn to that of a successful startup company. Unicorn startups are highly respected in the business world.
Asia’s tech unicorn landscape is inspiring cautious optimism across the continent that startups can thrive despite difficult market conditions. India, in particular, is experiencing rapid growth, with 16 startups receiving billion-dollar valuations in 2022 alone.
Table of Contents
Characteristics of a unicorn
Before we understand how to build a successful unicorn startup, let us look at the characteristics of a unicorn:
1. Innovations: Unicorns always bring disruption in the field that they operate in. They change the way people do things and carve a niche for themselves. They innovate to stay ahead of competition and remain affordable. For instance, Uber changed the way people commuted. And Netflix disrupted the TV and video industry by offering budget-friendly streaming services.
2. Technology: Most unicorns have a business that is heavily dependent on technology. This could range from anything like software, hardware, cloud computing, customer relationship management (CRM) systems or any technology that allows companies to run more efficiently with fewer resources. AI ( artificial intelligence ) is also used to automate processes, enhance user experience and improve customer service. Apart from just being used, the products and business models of many companies are completely based on technology directly.
3. Customer-focus: Most unicorns simplify the everyday life of their consumers. Most of them are in the B2C (business-to-consumer) space providing affordable products and services. So they have to incorporate good UX design and make it easy for consumers to use and understand. Most unicorns have a strong product and value proposition that they bring to their consumers.
4. Efficiency: Unicorns normally launch products with a minimum value proposition and take feedback to improve and make changes in the product. Once they are sure that it works well, they will scale up the product. Thus they are hugely efficient and economical. If the product doesn’t work, they will scrap it and come up with something else before scaling it up.
5. Growth: Unicorns are focused on growth, which is achieved with a clear vision. They test their products, validate their marketing and sales channels and quickly replicate and scale their products and services in various locations. To do this you must have clear growth goals and have a proper plan to scale. You also need to track key performance indicators to ensure that you are on the right course.
Also Read: Unicorns & Soonicorns: A Talent Roundup
3 Key Indicators of a Potential Unicorn
There are some key indicators that signify a potential unicorn. To become a unicorn, the following areas must be focused upon:
Most venture capitalists (VCs) look for people in a business before they invest. They look for founder teams with diverse backgrounds and skills. Most successful unicorns have been started by two or more people with diverse backgrounds (like technology, natural science and business). An academic degree with an advanced master’s degree is almost always a default. A good track record and work experience are added advantages.
Unicorns need to have scale and size to be successful and therefore the sectors in which they operate become critical. Playing in a large market improves the chances of the venture becoming a unicorn. A large market also offers immense growth potential for startups. A large market which is fragmented can offer an opportunity for a new player to disrupt it and make deep inroads.
Identifying new trends and making early moves allows a startup to enter uncontested spaces and build a strong position for themselves thus resulting in higher margins and faster growth. VCs look to invest in companies where the product or service works and also has sustained market interest. Thus timing your moves to ensure that you get the best outcomes is critical for a startup.
Can the technology be scaled?
VCs will look to see if the company can operate stably and efficiently when suddenly scaled up. This means adding millions of customers and thousands of employees and growing at a rapid pace. They look for potential to scale up instantaneously. Skilled teams from VCs will assess whether the technology is scalable and if automation can be used effectively to manage costs as revenues grow.
Clear path to profit
Ideally a startup should be solving a real need. You cannot have an idea or product and then try to find a market for it. VCs will look to see if revenues can triple in each year in the first two years after founding and then double for at least three years after that. A unicorn normally doubles their revenue every year for at least eight years. VCs also favor annual recurring revenues rather than one-off sales. So although initially startups may be having losses, it is essential to showcase a path to profits.
A unicorn is always very difficult to build. To be successful, you must know what success factors to look for and also how VCs think and operate. You can hit it big if you focus on specifics and get the basics right. A unicorn will always look to make the world a better place and create a product or service that will make life easier. When your foundation is strong, you can scale up with confidence and ensure that the team can keep pace