Its name refers to a well-known mythical creature, but its profit margin is the goal of many who decide to set their business idea in motion. We’re talking about the “unicorn startup”, a concept that has become widespread.

Running our own business is more than just coming up with a business plan. We do need an idea in the beginning; but later we should fine-tune it to figure out what we want to do and how to do it.

Then we must make sure our idea is viable by checking our invested capital, initial cost analysis, location and market study.

After the business analysis, registration and other requirements of the initial phase, we can run our business and try to hit the profit and growth targets we have set. This is hard for most businesses; but some are able to achieve big growth in little time, exceeding 1 billion dollars in value. Those businesses are called “unicorns”.

What's a unicorn startup?

A unicorn startup is a company that's been in business for under ten years, isn’t publicly listed, haven’t been acquired by a third party, and become valued at 1 billion dollars or more worldwide. It gets its name from the mythical animal, thanks to Aileen Lee, founder of Cowboy Ventures, who coined it in 2013 when referring to tech companies that had been valued as much without being having gone public. 

According to consultancy firm CB Insights, the planet is home to more than 1,100 unicorn startups — and counting, thanks by and large to new technology. The US is home to more unicorn startups than any other country.

Unicorns are startups, in which information and communication technology (ICT) plays a fundamental role. A startup isn’t the same as an SME. A startup is a recently founded company that has a scalable, technologically innovative business model. It maximizes growth potential with low material costs and third-party investors (like “business angels”, who, unlike traditional investors, take a stake in the startup's earnings as well as a role in its management). This Openbank article (in Spanish) will tell you more about startups.

On the other hand, a SME is a small and medium-sized enterprise, based on things like its business turnover and human capital. Unlike a startup, an SME is not always a young company, rarely gets financing from third-party investors, and tends to serve a specific area. These more traditional business features can limit an SME’s scalability and growth. Last but not least, an SME may use new technology; but its business model isn’t based on it. 

What makes a “unicorn”?

There is no standard formula to create a successful unicorn startup. It depends on many factors, some of which are out of our control. Some of the most common traits of unicorn startups are:

• Recent creation: Unicorns are emerging businesses that exploit a small or unknown market niche and achieve a value of over 1 billion dollars. Their workforce is also a sign of their “youth”, with employees being, on average, 30 and 40 years of age. 
  
  
• Innovation: New technology is a basic business feature of unicorns ti naje operations and communication more efficient. They often use social media to gain recognition.
  
  
• Scalability: Unicorns scale up and boost their returns quickly while keeping costs low. 
  
  
• Financing: Unicorns are adept at attracting investors and maintaining private equity, without being publicly listed.
  
  
• Business model: Unicorns’ strategies target end consumers with a disruptive alternative that meets their needs. Not only do they focus on their product, but also on customer satisfaction.

Interested in unicorn startups and want to learn more about them? This article (in Spanish) from Santander Argentina will tell you more about them, especially in Latin America.