What Is A Unicorn Startup?

Once a rare breed, unicorn startups are now becoming a familiar sight within the UK business world. But what is a unicorn startup, and why are they generating so much buzz among investors, founders, and industry watchers alike?

In short, a unicorn refers to a privately held company that’s valued at over $1 billion (roughly £759 million). 

The term was first coined in 2013 by venture capitalist Aileen Lee, in her TechCrunch article ‘Welcome to the Unicorn Club’, capturing the near-mythical status such startups once held due to their rarity. Fast forward to today, and the global herd has grown significantly.

The UK is holding its own, with 41 unicorns currently headquartered here. London, in particular, has become a dynamic hub for tech startups chasing the elusive billion-dollar milestone.

Unicorn startups aren’t just highly valued; they often signal major shifts within industries, combining rapid growth with game-changing innovation. Think of companies like Airbnb and Uber, which started as bold ideas and quickly became major players. 

We’ll dive into what defines a unicorn startup below, including why they’re important and what it takes for a business to reach this extraordinary level of success. 

How Are Unicorns Valued?

Figuring out what a unicorn startup is worth isn’t as simple as looking at sales or profits. 

These companies are often still in growth mode, building their product, finding their market, and getting customers through the door. So, unlike more established businesses, you can’t just check their revenue and plug it into a formula.

Instead, unicorns are valued based on what investors think they’re worth. These valuations usually come out of funding rounds. 

Let’s say an investor puts in $200 million for a 20% stake. This suggests that the company is valued at $1 billion. This seems simple on the surface, but it’s really about what the company could be worth in the future, not where it stands today. 

This kind of value is often referred to as the post-money valuation, the figure after new investment is added. It’s more of an ‘on paper’ number than hard cash. 

Take ByteDance (the company behind TikTok) as an example: it’s raised around $9.4 billion in funding, but its valuation has soared to over $400 billion. That’s all down to the investor brief on the company’s long-term potential. 

So, when people talk about unicorns, they’re usually talking about startups with big visions and even bigger expectations. Their value isn’t based on what they’ve already done, but on where they might go next, and that’s what makes them so interesting to watch. 

Unicorn companies are valued based on what investors think they’re worth.

Why Are Unicorn Startups So Interesting?

Unicorns don’t just make headlines, they make people sit up and pay attention, especially investors. 

One of the big reasons these startups are so fascinating is their potential to transform markets.

A unicorn company doesn’t just enter a space, it often creates one. When the time comes to exit, it could do so through a high-profile acquisition or merger, bringing in serious returns for those who backed it early. 

That’s why unicorns are a hot topic among angel investors and venture capitalists.

In most investment portfolios, some businesses won’t succeed. In fact, it’s expected. But just one breakout unicorn can more than make up for the rest, delivering returns that outweigh the risk. 

It’s no wonder that early-stage investors are constantly on the lookout for the ‘next big thing’.

After all, global giants like Google, Apple, and Amazon all started as unknown startups with big ideas. Those who spotted their potential early on saw incredible rewards. 

So, what exactly makes a unicorn startup stand out?

They shake things up: Unicorn startups usually don’t follow the rules. Instead, they challenge the way traditional industries work. For example, Uber completely changed how we get a taxi.

They make life easier: Most unicorns are all about solving problems in a smart, simple way. Spotify made music easier to enjoy on the go, while Instagram changed the way we share our lives online.

They grow fast (really fast): These companies usually start small, but they’ve got huge ambitions. Backed by investors, they scale quickly and often aim to take their product or service global.

Eventually, some unicorns go public through IPOs, others get bought out, and a few choose to stay private.

Either way, hitting that billion-dollar mark takes more than a great idea; it takes bold thinking, a strong team, and the ability to win over users and investors. 

Unicorn startups challenge the way traditional industries work and solve problems in a smart, simple way.

How To Become A Unicorn Startup

Becoming a unicorn isn’t just about luck! It takes a mix of vision, strategy and hard work.

Here’s a quick look at the key steps startups take to reach that billion-dollar milestone.

1. Have a Bold Vision

Unicorns start with an ambitious business idea that challenges the status quo. It’s not just about improving what’s already out there, it’s about creating something new, or doing it in a way that no one else has.

2. Solve Real Problems

The most successful startups focus on making life easier or better for their customers. Whether it’s simplifying a daily task or opening up a new market, the key is offering clear value.

3. Scale Rapidly

Speed matters. Unicorns don’t wait around, they grow fast, often expanding into new markets and customer bases quickly, backed by startup funding that helps them scale at pace.

4. Build A Strong Team

A great idea needs a great team. Unicorn startups bring together talented people who can adapt, execute, and push the company forward, even when things get tough.

5. Attract the Right Investors

Funding is crucial, but it’s more than just money. The right investors bring experience, networks and belief in the startup's long-term potential, helping it navigate challenges and seize opportunities.

6. Stay Customer Focused

Throughout their growth, unicorns keep customers front and centre, constantly improving their product or service to meet evolving needs. 

To become a unicorn, you need to solve real problems, build a great team, find the right investors, and always keep your customers in mind.

How Can We Help

To sum up, what is a unicorn startup? 

Essentially, a unicorn startup is a privately owned company valued over $1 billion, known for rapid growth, innovation, and disrupting entire industries. 

At Tramshed Tech, we’re here to support ambitious startups with unicorn dreams. Our vibrant community and expert-led skills programmes create the perfect environment for startups to scale fast. 

With flexible workspaces designed to inspire collaboration and growth, we help you overcome challenges and accelerate your journey to that billion-dollar milestone.

Find more about our spaces here, or head to our blog page for more articles on growing your business.