What is 'Unicorn'

Unicorn
A "unicorn" is a privately-owned startup business worth more than $1 billion. In venture capital companies, the term unicorn is often used. The first person to use the word was Aileen Lee, who works in venture capital. You have to think outside the box if you want to find a unicorn. Most of the money that goes into unicorns comes from private investors or venture capitalists because they are big. This means that ordinary people can't buy them to invest in. Many unicorns decide to go public, but there is no requirement for that.

Comprehending Unicorns
Most people in the financial industry use the word "unicorn" to describe a private startup worth more than $1 billion that is not yet public. It doesn't often happen that a person turns into a unicorn. A company needs a unique idea, a clear plan for growth, a good business plan, and an effective way to talk to venture capitalists and private investors to become a unicorn.

Unicorns have a few options for how to give the investors an exit:-

Upholding secrecy- Founders who wish to maintain control typically keep unicorns hidden. However, this constrains expansion potential. And they are typically obligated to provide a return on money to investors.

Become public- Some executives of unicorns may be hesitant to take their companies public due to the dilution of ownership. With an initial public offering, companies gain access to the funding necessary for growth (IPO).

Attractive to a potential buyer- A company's owners and management can achieve their goals more rapidly than if they remained private or went public.

Aileen Lee, who started Cowboy Ventures in Palo Alto, came up with the word. Cowboy Ventures is a fund for seed-stage startups. She said that only 0.07 percent of software companies that started in the 2000s would be worth $1 billion. Lee says it's just as hard to find one of these startups as it is a legendary unicorn.

Particular Considerations
This word is not only used in the startup business world. In reality, it's also a term often used in the human resources (HR) industry to discuss a hiring trend.

HR managers may have high standards for the people they hire to fill a position, leading them to look for people with more qualifications. In essence, they want unicorns, which makes a big difference between their ideal candidate and the candidates they can find.

For example, a medium-sized business might want to hire someone with experience in marketing, social media, writing, sales, and management. And they might look for someone who speaks three languages. It might be cheaper to hire one person with all these skills than to hire several people to do different jobs, but the new employee might not be able to handle it all, which could lead to dissatisfaction.

Thoughts on Unicorns
Most of the time, the value of a unicorn is based on how investors and venture capitalists think it will grow and change in the future. This means everything comes down to how things will be in the long run. This means that how well they do financially has nothing to do with how much they charge. In reality, not many of these businesses make money when they start.

Investors and business owners may have problems, though. If the company is the first of its kind in the industry and there are no other similar companies, there may not be another business model to compare it to. This makes the whole process harder.

Some opinions on unicorns:-
Some people say that a large number of companies with high valuations show that technology is driving a new wave of production, like when the printing press was invented about 600 years ago. Based on 2019 data, SV Angel was the one that put the most money into early-stage companies, worth more than $1 billion.

Others say that since the Great Recession, a lot of money from all over the world has been going after unicorns because of globalisation and how central banks handle money.

Why does the unicorn matter so much?
Unicorns represent the top startup companies. Once you reach the unicorn status, the importance of the company is much more than regular startups.

What does "unicorn" mean in modern English?
It's unclear when English speakers decided that "rare and highly wanted" were enough to call something a "unicorn." Now, a "unicorn" is a new company worth at least $1 billion.

When is a company called a unicorn?
The business world pays a lot of attention to startups that become "unicorns," which makes sense. A company must be worth at least $1 billion to be a unicorn startup, and as of 2022, there are only 554 unicorns worldwide.

Disclaimer: This content is authored by an external agency. The views expressed here are that of the respective authors/ entities and do not represent the views of Economic Times (ET). ET does not guarantee, vouch for or endorse any of its contents nor is responsible for them in any manner whatsoever. Please take all steps necessary to ascertain that any information and content provided is correct, updated and verified. ET hereby disclaims any and all warranties, express or implied, relating to the report and any content therein.