Member-only story
2 Quick Points to Simplify a Unicorn
A term used in the venture capital industry
A unicorn is a term used in the venture capital industry to describe a privately held startup company with a value of over $1 billion. The term was first popularized by venture capitalist Aileen Lee, founder of Cowboy Ventures. When it comes to further simplifying and understanding what a unicorn is, the following two points assist in doing that:
1. The Value of a Unicorn Is Based on Investor Analyses and Forecasts
2. Popular Unicorns You May Know
1. The Value of a Unicorn Is Based on Investor Analyses and Forecasts
When it comes to how a unicorn is valued, it is based on how investors, typically venture capitalists, feel a startup company will grow and develop, typically based on multiple analyses and forecasts. For example, a venture capitalist may conduct a cost-to-duplicate analysis to determine how difficult it would be to duplicate what a startup company is creating, a risk factor summation to evaluate the potential risks for a startup company such as legislative and manufacturing risks, and a discount cash flow to forecast future cash flows to determine the growth prospects of a startup company.
In conducting analysis and forecast on a startup company, a venture capitalist will then determine what to invest in a company. Based on the amount of money a company raises during an investment round, its valuation can be determined. For example, a startup raising a $1 million Series A investment round may be valued at $10,000,000. A startup will typically not be valued as a unicorn until multiple rounds of investments have occurred, and it has had some time to mature. Some unicorns have been able to earn their $1 billion valuations as early as their Series B, while some as late as Series F.
2. Popular Unicorns You May Know
Unicorns are everywhere, and you probably use their products and services. As of February 2022, there are over 940 unicorns around the world. Bytedance, Stripe, and Canva are three of the top unicorns. Bytedance is an internet technology company founded in 2012 that operates creative content platforms, with the most popular platform being TikTok. The company is currently valued at approximately…
