How to build a unicorn
These are the key ingredients all startups need to become billion dollar businesses
To little girls and boys (and some adults) they’re mythical horses with horns, but for budding entrepreneurs and investors, unicorns are groundbreaking startups that can change the world.
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In the context of business, a unicorn is a privately held company that has an overall value above $1 billion dollars. The milestone is always attributed in American currency, so startups in the UK can technically achieve it for around £250 million less, depending on exchange rates. It’s not necessarily an indication of profitability – some actually operate at a loss – instead, it’s more of an investor estimation that the company has the potential to become highly profitable in the future.
The terminology is thought to have been coined by venture capitalist Aileen Lee in a 2013 article detailing the so-called ‘unicorn club’. Lee’s firm, CowboyVC, admitted that the label wasn’t perfect, as a unicorn is a mythical creature that doesn’t actually exist whereas billion-dollar startups very much do. The company stuck with it, however, as they felt it denoted “something extremely rare and magical”, which in context made sense – there were only 39 companies in the club in 2013. As of January 2021, there are more than 500 unicorns around the world.
Hire and inspire
While there’s no definitive blueprint for becoming a unicorn, there are some key ingredients that will give you and your business a greater chance of making it. No one runs a company by themselves – at least not one that’s a global success story – and the biggest and best are always brimming with talented people. Getting the right employees in place should be a priority from day one, with key positions filled by the brightest minds available. For Tomer Weingarten, the co-founder and CEO of unicorn SentinelOne, the right team is an integral element of all billion-dollar companies.
“You need people to execute the vision, tell your story, build and support the products,” Weingarten says. “But you have to also allow your team to be their best selves, let them be creative, don’t micromanage them, and allow them to flourish; hire them, inspire them and then get out of their way.”
There may be some limitations to finding the right talent. For instance, in the UK there is a long-running skills shortage, specifically in the digital job market. Many feel this is also exacerbated by the government’s attitudes to immigration. You may also have trouble meeting salary requirements as a small business, but getting the best in is often the smartest investment a company can make.
Whoever you do hire, they will need to be inspired to do great things for you and your business. This, Weingarten believes, is achieved by creating an environment that generates passion and commitment. Running a startup is easier, he suggests, with the right culture in place.
“It doesn’t particularly matter which values you decide to use, as long as they are moral, consistent, communicated and lived from the top down and then are incorporated into how the business works,” Weingarten says. “It’s the company culture which separates the unicorns from the donkeys. You need to saturate your organisation in these values so they seep out of every pore; every point of contact people have with your organisation needs to leave them feeling like they’ve met your values.”
Long term investors
Per Briloth is the CEO of VNV Global, one of the early investors in health tech startup Babylon, which reached unicorn status in 2019. Briloth describes his company as a “high-conviction investor” that looks for long-term bets and sticks with its startups through several funding rounds. His advice to small businesses is to make sure they pick an investor that’s in it for the long haul.
“Not only do you need an investor with the resources to support your expansion plans, but you need someone who truly believes in the company,” Briloth explains to IT Pro. “In the tech sector, it seems to be important to grow as fast as you possibly can – a practice known as blitzscaling – which is one of the reasons why e-scooter companies and food delivery companies have raised so much funding.”
The danger here is fair-weather investors: Those that will pull out when problems arise. You may have an idea that hasn’t found its market just yet, you may be impeded by regulation changes, or another competing product may have sprung out of nowhere. Whatever the challenge, financial backers need to be firmly in your corner.
Know when to pivot
Fantastic business ideas never come fully formed; they grow and evolve over time, even after you’ve gone to market. Startups need to keep this in mind, because while they may never have to change, having the foresight to do so could be what keeps them from going under.
Many shrewd entrepreneurs made tweaks to their business models last year, either switching to meet increased demand or opting for a new direction to survive in the so-called new normal. As the CEO of telecommunications startup Infobip, Silvio Kutić says, persistence is a good trait for entrepreneurs, but they shouldn’t be afraid of change.
“You can't be afraid of making mistakes, so long as you learn from them and never repeat the same mistake twice,” Kutić says. “You need to be responsive and reactive. There has been a huge change in how we’re consuming different services, accelerated by the COVID-19 pandemic, and this is set to continue.”
A great example of a business that pivoted is US startup Outreach, which began as an online recruitment company. It struggled to sell its services and its small team couldn’t generate the income it needed to survive. With capital running dry, CEO, Manny Medina came up with an idea to build an AI-based tool to make automated sales pitches. The idea was so good, not only did it get the business back into the black, but the tool itself became a more viable product to sell. Within five years, Outreach went from the brink of bankruptcy to becoming a unicorn.
Launching a small business and achieving unicorn status isn't easy; there will be lots of difficult decisions, long nights and mistakes along the way. Brilioth’s final piece of advice is to add some fun.
“That is the way to get the best out of the team that is working with you,” he explains. “Investing in early stage companies, is a creative business and the best ideas come when you are having fun.”
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