Unicorns are still Unicorns in Finance

A unicorn is a mythical creature that is rare to find. Unicorns are frequently mentioned in financial terms these days. This term was firstly used by Aileen Lee who is a U.S. angel investor. She is a venture capital investor. In one of her articles in the year 2013 in The New York Times, she mentioned: “Welcome to The Unicorn Club: Learning from Billion-Dollar Startups”. This word became so famous then.

In the venture capital industry “Unicorn” is used for a privately held start-up company with a value of over $1 billion. When this term was used in 2013, Aileen mentioned that the software start-ups in the early 2000s barely touched the valuation of $1 billion. Finding these start-ups is as rare as a unicorn.

The valuation of start-ups depends on how much amount that company is going to receive from investors in exchange for their particular shares. For example, any venture capital investor is going to invest 10 lakhs in exchange for 10% of a company’s share, then the valuation of the company becomes 10 lakhs multiplied by 100 which is 10 crores. As of June 2020, there are around 600 Unicorn companies in the world. You will be amazed to see the rising figures in India. By 2016 India had only 11 start-ups that had a valuation of more than $1 billion. In the year 2021, we see there are around 100 Unicorn Start-ups companies in India. Major boom in startups companies became unicorns seen in 2020 and 2021.

Some of the famous start-ups that recently became unicorns are Urban Company, Upgrade, Pharmeasy, MPL, Grofers, Meesho, Cred. Many Startups are coming with IPO after becoming the unicorn such as Pharmeasy, Paytm, Zomato, etc., Majorly when companies hit billion dollars, they are at the end of series funding. They can then seek funds through an initial public offering (IPO). A startup, on the other hand, remains a unicorn until it files for an IPO. When a company goes public, it loses its unicorn status.

Start-ups have exploded in popularity in recent years. What caused the rapid expansion of start-ups? People began to trust investing in start-ups after they were successful. Now, start-ups are getting a lot of funding. A new phrase has emerged: venture capital. Venture capital is a type of private equity finance provided by venture capital firms to start-ups and early-stage businesses. Startups receive funding from venture capital firms such as Sequoia Capital, Accel, Blume Ventures, and Matrix Partners. Company capital is a high-risk investment because if the venture fails, the investors will lose their money. In the first six months of 2021, Indian businesses received over $12.1 billion in venture capital funding, which is $1 billion more than the total funding they received the previous year. As a result, for Indian companies, raising funding from venture capitalists is the way to go.

It’s becoming unsettling to use the term unicorn to describe start-ups with a valuation of $1 billion or more. When the term unicorn was first used to describe start-ups, only 0.07 percent of them met that threshold, making unicorns extremely rare. However, if we look at the current state of start-ups, we can see that they are numerous, with around 100 in India alone. So, would you be as excited to see the 100th unicorn as you were when you first saw one? Obviously not!

As a result, the term “growing start-ups” needs to be redefined, as they are no longer so uncommon. My suggestion for a new term is “Emerald,” because it is more difficult to come by but is plentiful. Emerald also symbolizes balance and harmony, as does the color green in general, which represents abundance, economic success, and growth in all elements of society, whether in nature, the business world, or within ourselves. Start-ups that are touching new heights are like the Emerald, they represent growth.

I’d be delighted to receive feedback on this blog, as well as recommendations for redefining Unicorns. 

-Akansha Jangid

3 thoughts on “Unicorns are still Unicorns in Finance

  1. I agree with the author that unicorns are no longer the rare breed that they were but now it is just a stopping platform for the running start-ups and should be renamed to warhorses as they are fighting in the front lines for their slice of the cake of success.

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  2. I agree with the author about the unicorns losing their rarity that made them special now they are just a fancy name to make people happy and the name should be changed to warhorses as they are now just fighting in the front lines for their slice of success.

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  3. I really liked the idea of renaming the successful startups from unicorn to emerald, as they are now more and more one billion dollars worth of startups around us. but as a student of management who in the future wants to be in those groups of startups, I don’t think the name is the issue here because now the name unicorn is really known to relate us with the startup, rather than we should raise the limit of one billion dollars to 10 billion dollars to be known as a unicorn because as the author says the term was issued for startups of the 2000s wherein that time world largest company was worth around 100 billion dollars but we are living in 2021 where company can be worth in over a trillion dollars even two trillion dollars. so according to me if we just raised the limit of knowing as unicorns rather than changing the name.

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