UNICORN - Definition, Valuation, and Future
                     UNICORN - 
DEFINITION, 
VALUATION, AND 
FUTURE
What is a Unicorn?
 Unicorn is a term that describes a privately-owned 
startup with a valuation of over $1 billion. The term 
was introduced by venture capital investor, Aileen 
Lee, in 2013 to describe rare tech startups that 
were valued at more than $1 billion.
Source: corporatefinanceinstitute.com
Phenomenon of unicorns
 The phenomenon of unicorns is quite controversial. 
Although some professionals believe that such 
companies are just a result of technological 
progress and innovation, others believe that the 
increasing number of unicorns is a sign of a bubble 
in the industry.
Source: corporatefinanceinstitute.com
Valuation of Unicorns
 The valuation of unicorns is derived from valuations 
developed by venture capitalists and investors who 
participated in the financing rounds of the 
companies. Since all unicorns are startups, their 
value is primarily based on their growth potential 
and expected development. 
Source: corporatefinanceinstitute.com
Financial performance
 The unicorns’ valuation is not strongly related to 
their actual financial performance or other 
fundamental data. Note that despite their 
abnormally high valuations, many of the companies 
have yet to generate any profits.
Source: corporatefinanceinstitute.com
Sophisticated process
 Valuing unicorns is a sophisticated process that 
involves the consideration of various factors and 
the development of long-term forecasts. Additional 
complications often arise due to the business 
models of such companies.
Source: corporatefinanceinstitute.com
Fast-growth strategy
 Nowadays, venture capitalists primarily rely on 
fast-growth strategies for a startup’s development. 
 Such strategies encourage investing large amounts 
of money in every round of financing, in order to 
capture the biggest possible market share as soon 
as possible, as well as to prevent the emergence of 
major rivals in the marketplace. 
 Therefore, a unicorn company’s valuation 
skyrockets every round of financing.
Source: corporatefinanceinstitute.com
Buyouts
 Currently, many promising startups do not meet 
the requirements for an IPO. Instead, tech giants 
such as Facebook or Google acquire many startups 
to diversify their business and to prevent potential 
major competitors from arising in the marketplace.
Source: corporatefinanceinstitute.com
Innovations
 Innovations in technologies allow the faster growth 
of startups. By leveraging the new technologies, 
unicorn startups manage to reach their customers 
faster and shorten the time required to achieve 
mass production.
Source: corporatefinanceinstitute.com
Future
 Although the Indian start-up ecosystem is growing, 
some of the start-ups, who reach a certain scale 
migrate from India, in search for better regulatory 
incentives and risk capital availability.
Source: corporatefinanceinstitute.com
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