Lessons From Unicorn Startups: Joining The $1B+ Club

It’s the stuff of legends. Launching a unicorn — a privately owned startup valued at a $1 billion or more. Many entrepreneurs dream of joining the herd and becoming a household name like Uber or Airbnb. And with a new unicorn being born every four days, it can seem as though these startups emerge from the thousands of entrepreneurs in some Darwinian-like journey. But don’t be fooled. It takes a talented and dedicated team to rise through the ranks, especially when you consider the failure rate of U.S. companies after five years is over 50% and over 70% after the ten-year mark.

In order to better understand Unicornland and how to model your startup, Embroker put together this guide that dives in the unicorn ecosystem, including factors like geographical placement, and industry breakdown and lessons from herd leaders that you can apply to your startup — all based on the data.

#1 Develop A Meaningful, Ownable Value Proposition.

First and foremost, entrepreneurs need to establish a powerful value proposition that not only differentiates their company from marketplace competitors but also makes it easy for their target customer base to understand.

A value proposition is the benefit you provide to the people who pay for your product or service. Your brand should have a benefit that is clearly important to the marketplace and solves for a problem customers didn’t know they had.

#2 Know When To Pivot

The law of the marketplace is that companies must adapt or face extinction. In other words, be ready to relentlessly evolve your value proposition. In this case, your value proposition should grow and expand to reflect both internal and external developments. It’s all part of the startup zeitgeist — understanding industry trends, innovating and staying ahead of the game.

#3 What Industry Will You Be Taking On?

One of the most important factors to consider is the industry in which your startup will reside. This is a decision not to be taken lightly, and it is important that you focus on the long-term, or you might enjoy success for a few years and then a decline.

When you break down leading unicorns, there’s a pattern in which industries dominate the herd — the bulk existing in four different spaces: FinTech (12% of all unicorns), eCommerce (11%), internet software (9%) and on-demand (6%).

Now, this doesn’t mean you’re doomed to find funding outside of these industries. What it does mean is that these investors may focus on them looking for a big opportunity. Remember that the only valuable idea is one in one of the top four categories. Startups have flourished in industries ranging from like 3D printing and entertainment to HR tech and even tech for kids and babies.

So, if you want to make sure that you are betting on the right horse, here are some important industry factors to consider when building your startup:

• Your expertise
• Projected industry growth
• Technologies
• Demand
• Competition
• Regulatory environment
• Scalability

#4 Unicorn Birthplace

Location. Location. Location.

A decade ago, you would have been hard-pressed to find many unicorns born outside the U.S. Today things look a little different — 44% have founding headquarters inside the U.S., 37% in China and 19% spread throughout the rest of the globe.

Despite the global distribution of today’s startups, it’s important to keep tabs on where the next hot city is. In other words, situating yourself in a known tech hub can be a helpful component to acquiring venture capital. After all, there’s a reason why many successful startups have set up shop next to Wall Street bulls, in innovative hotbeds like Silicon Valley and tech hubs like Boston and Seattle. This is where the majority of big checks are written.

#5 Founding Team Size

The last point we’ll cover here is the size of your founding team. Should you go at it solo, take on a co-founder or establish a founding team? Unfortunately, this is not a black and white answer, but if you take a look at the top 23 unicorns, you’ll be able to pick out a trend in founding team size — nearly all are under 10 founders.

Of the top 23 unicorn startups, the bulk has a founding size of only one to two people. There are many reasons for this, but one school of thought is that the disagreement, stress, and conflicts that inevitably come with the startup journey are more easily resolved with a smaller founding team.

Two the contrary, two (or more) heads are better than one. Because successful startups often require a variety of skills that few people possess on their own, having more than two founders can help make the representation of that entire skillset more complete. While it’s important to bring a wealth of different skill sets to the table, one thing’s for certain, founders and co-founders should all share the same vision.

To learn more about tips from startup leaders and how to navigate the unicorn ecosystem, check out the full unicorn startups guide here.

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