Picture this: you’re building a startup, and someone mentions becoming a unicorn. Of course, they aren’t talking about a white horse with a horn on its forehead but rather meaning that a unicorn company is something so rare and extraordinary that feels almost unattainable.
Indeed, for some startups, hitting the $1 billion mark or beyond (that’s how your startup must be valued to get the mythical unicorn status) can be really hard, and for some, it’s even impossible.
Despite a tighter VC market, new unicorns are still being created—just at a slower pace compared to the 2020-2021 boom. As of 2024, over 1,200 companies worldwide hold a unicorn status, meaning that many investors are ready to back high-potential businesses and value them at $1 billion or more. Just look at Elon Musk’s xAI, a startup that has not only reached the unicorn threshold but successfully surpassed it with a valuation of $24 billion.
The terms “unicorn status” and “$1 billion valuation” get thrown around in board rooms, startup conferences, and investment meetings (and we were talking about them a few seconds ago), but what does it really mean to be a unicorn company?
We’re going to crack this—what is a unicorn in business, why it matters, and what it takes to become one. Dive in!
Understanding the unicorn meaning in business
We’re going to start with the basics, fleshing out the origin and the meaning of a unicorn company. We’ll also speak about valuation so you get a full picture of what a unicorn status is and how (or why) it is granted.
What’s the unicorn startup definition?
A unicorn company means a privately held startup valued at $1 billion or more.
This sounds pretty simple and clear, but let’s elaborate on it a bit.
The unicorn company definition was coined in 2013 when Aileen Lee, the founder of Cowboy Ventures, was looking for a way to describe rare and exceptional companies that managed to hit the $1 billion valuation mark. After analyzing over 60,000 software and internet-based companies, she found only 39 that had reached this valuation threshold between 2003 and 2013. At that time, finding such companies seemed as rare as spotting a mythical unicorn.
However, the 2014-2021 era gave birth to many unicorns due to the perfect storm of low interest rates, big checks written by investors right and left, and high multiples, which literally bloated private companies’ valuations, throwing into the market more and more unicorn statuses. The problem was that not all unicorns had strong fundamentals, some of them defied traditional growth metrics and relied more on investor hype than sustainable revenue. As a result, some unicorns collapsed—like WeWork, Quibi, or Theranos—proving that not all unicorn companies were meant to last long.
Since VC funding started falling off a cliff in 2022, it has been harder to become a unicorn company (again), meaning you need to put in more effort to get this mythical status. Investors now talk more about sustainable models, revenue growth, and profitability. And they expect the next unicorns to have these strong fundamentals.
All that said, we can slightly refine the traditional understanding of unicorns, given the current VC landscape. While the unicorn startup definition still speaks for itself, today, unicorns are more likely to be valued based on sustainability and profitability potential rather than investor enthusiasm (as it was a few years ago).
How is a unicorn startup valued?
We mentioned that investors started to value startups stricter, what does this actually mean?
Unlike established companies that are valued based on their current revenue and profits, unicorn valuations are based on future potential. It’s more about what investors think a company could be worth—taking into account market size, growth trends, and financial projections, including those from unicorn founders—rather than what this company is actually worth right now.
Note that nowadays, investors also value strong business fundamentals; they don’t just rely on their gut feeling and hype as they did during the 2014-2021 boom.
To make things clearer, let’s have a look at a practical example: When an investor plans to invest $200 million in a company and believes the entire company is worth $1 billion, it doesn’t mean that this company has raised $1 billion in funding or is generating that much revenue—it’s just an estimate of what could become a unicorn company. This means that once this company reaches $1 billion or more in worth and later exits—through an IPO or acquisition—early investors could see big returns on their investments.
What makes a company a unicorn?
If you’re wondering what actually hides behind the meaning of a unicorn company, we’ll zoom in on it in this section. The short answer—these companies aren’t only about billion-dollar valuations but also about potential, innovation, and market opportunity.
Let’s have a closer look at what a unicorn is in business.
A unicorn company means more than technology
We want to clear up a common misconception right from the start. When most people hear about the definition of a unicorn, they typically think about tech unicorns, but this is not quite the point. About 87% of unicorns do leverage software, but what is really important is how they use this technology to solve really big problems.
Take a look at companies like Airbnb or Uber. These unicorn founders didn’t just create a new app—they completely changed the entire industry. They found the pain points millions of people suffered from and developed solutions that seemed pretty obvious once they existed. That’s the real unicorn magic.
Unicorns are about scale and growth
Here’s an interesting stat: over 62% of unicorn businesses are B2C (meaning business-to-consumer companies). Why? The answer is pretty simple—they scale faster. When you’re building something that could potentially impact billions of people’s lives, you’re creating a kind of massive market opportunity. And voilà, investors are more eager to crown you a unicorn and open their wallets wider.
Unlike B2B companies with longer sales cycles and lower barriers to user adoption, B2C unicorns attract users quicker, scale faster, and interest more high-profile investors. On average, a unicorn company reaches its billion-dollar valuation in about five years—pretty fast. This rapid growth isn’t about slow, steady progress but an aggressive and efficient push forward.
To be a unicorn company means to rewrite the rules
Unicorns don’t typically improve industries, they can fundamentally change how the industry operates. They challenge traditional business models, searching for inefficiencies and creating new ways of doing things that didn’t seem possible before but, once established, felt like they had always been present.
Take Uber, for example. Before Uber, when people wanted to get a taxi, they needed to call a cab company or hail a taxi from the street, hoping for an available car. Sounds quite annoying. Uber spotted this pain point and suggested a solution—anyone with a smartphone could book a ride instantly. No need to call and wait anymore, just place your order in the app and get matched with a driver. Also, Uber introduced the concept of surge pricing—if the demand is high, the price goes up, which incentivizes drivers to accept rides during peak hours. This helped balance supply and demand. As a result, many traditional taxi companies rethought their pricing strategies. That’s how Uber rewrote the rules of the transportation industry.
How to become a unicorn?
As you can see, unicorn founders aren’t that mythical, and it’s quite possible to become a unicorn. Yet, it’s not about luck at all but about strategy. That’s why we’ve collected some tips that can help you move in the right unicorn direction.
➡️ To become a unicorn company means to find your big idea. Try to spot a massive market opportunity—look beyond what exists, think outside the box, and imagine what else could benefit the target audience. A unicorn in business can be about giving a completely unique solution or improving an existing one. Most importantly, this solution can change the industry and people’s lives and let investors see huge potential.
➡️ You need to have the right team on board. Targeting a unicorn status means having people with you who can believe in something big and are willing to solve complex problems. That’s why, when attracting top talent, do this not only with salaries but with your vision, too.
➡️ What makes a company a unicorn is its ability to stay ahead of the curve. The business world moves fast, and if you don’t catch up with this speed, you’re more likely to fall behind. Being a unicorn company means being adaptable and continuously innovating—while others follow the trends, unicorns set them. They lead innovation and anticipate where the market is going next to act earlier than the competition.
➡️ The solution you push into the market must be scalable. Investors expect to see their returns in the near future (as we mentioned, the average time for a unicorn to hit the valuation mark is around five years). Yet, this doesn’t mean you have to be the biggest overnight. Of course not. But investors must see that you have the potential to become one of the biggest—that your solution can scale efficiently and sustainably. Coming back to Uber, this unicorn didn’t own cars but created a platform that could quickly go worldwide.
➡️ Growing a unicorn company means getting strategic funding, and you must know how to secure it effectively. While big checks can drive faster growth, unicorn founders know how to deal with venture capital wisely, close multiple rounds, and build relationships with investors to keep the ‘growth wheel’ always moving forward.
Wrap-up: Becoming a unicorn company means more than billion-dollar valuation
When most people talk about unicorns, they typically focus on reaching a billion-dollar valuation mark. But unicorn companies mean much more than this.
Unicorn founders solve really big problems, create big value, and build a business that can change the way the whole industry works.
When the unicorn startup definition was first introduced, it was rather challenging to become one (that’s why Aileen Lee came up with such a comparison). During the sweet era of high valuations and easy money, this concept became diluted as more and more unicorns flooded the market, which contradicted the nature of unicorn startup meaning—something unique and hard to attain. Yet, nowadays, the term is again valid given the economic and venture funding headwinds.
What does this mean for those who want to become another unicorn company? This means putting in more effort, having stronger business fundamentals with a focus on sustainability and profitability, and knowing which investors to pitch.
Need assistance with investor targeting and outreach, investment materials, and growth strategy? Contact our Waveup team—we have years of experience in finance, venture funding, and business development, and we’re ready to help you become the next big thing in the market.