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Unicorn startups are highly respected in the business world, and rightfully so. To become a unicorn startup, a company needs to reach an investor valuation of $1 billion or more, and as of 2023, there are only 554 unicorns worldwide. Fintech company Divvy, analytics startup Starburst, and sales engagement platform Salesloft In the first month of 2023, seven companies joined The Crunchbase Unicorn Board — the third month in a row for new unicorns to number in the single digits.
While it’s not impossible, attaining unicorn status can be incredibly difficult. In fact, a business only has a 0.00006% chance of becoming a unicorn, and it takes an average of seven years for nascent startups to grow into unicorns.
That being said, there are startups that beat the odds. How do they do it? In this unicorn startup checklist, we’ll go over common characteristics and strategies of successful unicorns so that you can follow in their footsteps to become more unicorn-like.
Unicorn Startup Checklist
While this unicorn startup checklist doesn’t guarantee that you’ll become a unicorn, it’ll help you better understand the processes and business strategies that startups utilize to succeed in their markets.
Follow these steps to build a product, find a business model to generate profit, attract investors, and eventually scale up.
Develop a minimum viable product (MVP)
- Identify a user problem and propose a solution
- Discover a “large, homogenous” potential target market
- Create a product that’s accessible, user-friendly, and cost-effective
- Develop an MVP with only the necessary features included
- Test the MVP with users to get feedback
- Make changes to the MVP based on feedback
- Calculate the costs to build the product
- Build and launch your product
Determine Your Business Model
- Confirm that your product solves real problems based on user feedback and initial performance
- Identify your primary customer and audience
- Develop a strong value proposition that sets you apart
- Price your product based on:
- The value it provides users
- Competitor prices
- Target market demographics
- Select sales channels for your product
- Execute a local or small-scale rollout to validate your business model
- Focus on delivering positive customer experiences
- Gather customer reviews
- Review and revise your business model periodically
- Bootstrap by:
- Investing your own funds
- Getting contributions from friends and family
- Raise venture-backed capital through seed and/or Series rounds
- Prepare a pitch deck
- Pitch to investors
- Prepare for due diligence
- Negotiate with investors and sign the contract
- Launch a crowdfunding campaign
- Showcase your product or business idea
- Communicate the benefits of investing in your company
- Set a funding goal
- Promote your campaign
- Obtain a loan from:
- Venture capital firms
- Credit unions
- Online business loan providers
Scale Your Startup
- Ensure you have achieved product-market fit
- Document and standardize processes for customer acquisition and sales
- Determine how to identify prospects
- Develop advertising and marketing strategies
- Automate marketing and sales processes if possible
- Expand your business to other locations/markets
- Add new features or products to existing offerings
- Assemble a team by hiring new talent
- Create new departments as needed
- Attract new investors
Traits of a Unicorn Startup
While there are thousands of new businesses that pop up every year, most startups fail, and only a small percentage of the startups who succeed can become full-fledged unicorns. To improve those odds for your startup, let’s look at what characteristics these unicorns have in common and how you can emulate them.
1. Unicorns are Disruptive
In business, disruption is a good thing, especially for aspiring unicorns. Disruption refers to innovation in an industry that radically affects the way that the industry or market operates. Disruptors usually start out at the bottom of the market by providing simpler, cheaper solutions that meet the same needs as higher-end products.
These products become increasingly appealing to consumers due to their affordability, and the business gradually moves up the market, maybe even taking it over. A notable example is Netflix, which disrupted the video and TV industry by providing budget-friendly streaming services.
Disruption requires startups to come up with new, creative solutions that might differ from the conventional. To do so, experiment with different business models — such as freemium, subscriptions, or commissions — until you find one that works for you. Think outside the box and seek to innovate, but also remain agile so you can pivot at any given time.
2. Unicorns are Tech-savvy
Growing companies take advantage of technologies and software available to help the business scale. Whether it’s through cloud computing, Customer Relationship Management (CRM) systems, or business software, leveraging technology allows companies to run more efficiently with fewer resources.
Advancements in AI make it one of the most versatile tools that businesses can take advantage of. AI can be used to automate processes, provide customized user experiences, improve customer service, and more. For example, DoorDash uses AI for logistics, and Kabbage uses AI to disrupt the banking industry.
To go beyond just using technology, you could also base your product or business on technology, as the majority of unicorns do. In fact, nearly 90% of unicorns provide software products.
3. Unicorns are Consumer-focused
Over 60% of unicorns have a B2C (business-to-consumer) business system, which means their business model revolves around providing affordable products and services to everyday consumers. To create products that consumers actually want, you have to identify ways to improve the lives of a specific target audience. Additionally, products also have to incorporate intuitive UX design so that it’s easy for consumers to use and understand.
Unicorns offer a strong value proposition or a promise of how and why the product will bring value to customers. Having a strong value proposition will improve both your sales and marketing efforts.
As technology becomes more integrated with business operations, these useful tools can help elevate your startup.
4. Unicorns are Efficient
The concept of building MVPs comes from a business approach that’s known as the Lean Startup, in which startups can maximize efficiency by repeatedly testing and adjusting their MVPs based on user feedback.
Since MVPs are only equipped with the “must-have” features, it’s more cost-effective to build and allows you to pivot without sacrificing a fully made product.
One example of a successful MVP was Uber, an idea borne out of the founders’ struggles to hail a cab on a wintery night in Paris. They initially tested their MVP with only three cars and a simple interface, collecting user feedback after each ride to make improvements. After adding new features over the years, Uber has grown to be a world-renowned company.
Like Uber’s early MVP, your MVP doesn’t have to be fully complete. It’s meant to gauge whether users are interested in the product at all, so if there’s no interest, you can scrap it and pivot to another idea.
5. Unicorns are Growth-driven
The unicorns analyzed in the book selected a Massive Transformative Purpose (MTP) for their business, like Google’s “Organize the World’s Information.” An MTP is a highly ambitious goal that drives the team and encourages them to think outside the box to reach said goal. With a clear vision in mind, these unicorn companies achieved growth by validating their marketing and sales channels with local testing, then quickly replicating the successful strategies in other locations.
To scale your company like a unicorn, you should establish clear growth goals and identify a vision for your company, or perhaps an MTP. Create a plan to scale by identifying promising sales channels and using key performance indicators to keep you on track.
Growth Lessons from New Unicorns
Growth doesn’t happen overnight. Even the fastest-growing startups may need to go through multiple rounds of funding to achieve unicorn status. Follow in the footsteps of recent unicorn startups by applying their tips for growing and running a company.
Hire the Right People – Guild Education
To build up a successful startup, you need strong team members who will help drive growth. It’s important to hire people with not only the skillsets you need, but also the same values. If everyone is on the same page about where they want the company to go, you’ll be able to collaborate more cohesively to reach those goals.
This approach applies to hiring team members as well as members of the board. Rachel Carlson, co-founder and CEO of ed-tech company Guild Education, said having a board is essential in helping identify business risks and potential areas of growth.
She suggested changing the board member roster as your company scales to create a board that will help meet the company’s new needs.
“A shared value system and a level of trust [are] really important because it’s easy to get sideways,” she said.
Solve Real, Existing Problems – Canva
Products that address customers’ needs or wants will naturally gain users. That’s why it’s important to identify a problem that your business aims to solve from the get-go. Online infographic creation platform Canva did just that, and was able to earn unicorn status in 2020.
“If your startup solves a problem, when you launch, you’ll have an audience that cares about your company. And then they will tell other people because they care about that problem, too,” said founder and CEO Melanie Perkins.
Problems can be inspired by personal experiences or common issues faced by the general population. After solving the initial problem, continue improving your product by adding features that users want and ask for.
Know Your Stuff – Airwallex
Investors play a huge role in funding your startup, so it’s important to get them on board with your business.
Fundraising can be a long, arduous process, but the key to success is to have confidence in yourself and your business, said Lucy Liu, CEO of Airwallex, a cross-border payment platform. The company became a unicorn in 2019 and it has since exceeded the $1 billion valuation mark.
When it comes to fundraising, Liu said that you need to demonstrate to investors that you know your business and your competitors inside and out, “otherwise, why would they trust you with their money and why would they support you?”
Because investments are business relationships and not loans or donations, you’ll have to convince VCs that your company is worth backing, Liu added.
“To appeal to investors, you have to think like an investor,” she said.
Manage Costs Effectively – Quizlet
To become a unicorn, you may have to start thinking like a camel, an animal that represents adaptability, perseverance, and resilience as they’re able to survive in the desert.
Having this mindset is especially useful during times of business uncertainty — during the pandemic, for instance — as it allows you to get through the crisis and sustain growth during unpredictable conditions.
This requires financial planning and effective cost management throughout the business life cycle to aim for a long-term growth curve. Reduce your burn rate by cutting unnecessary costs and invest in the most important things — your product and your team.
“You want to have a business that can survive the ups and the downs,” said Matt Glotzbach, CEO of Quizlet. The company, which offers online study platforms, became a unicorn during the pandemic.
“Resiliency for me has two factors: one is the unit economics of the business for user acquisition, and the second is how far do you invest in headcount ahead of the revenue curve to drive that growth? This is where we make calculated decisions and have expectations for the investments where, if we’re right, we grow significantly, and if we’re wrong we won’t suffer significantly,” explained Glotzbach.
Cultivate Relationships – Calendly
Building relationships is a crucial part of running a successful business. Having a network of contacts allows you to more easily find suitable business partners, prospective clients, or potential investors.
Establishing a strong rapport with established business leaders can be especially beneficial for newer companies, since they can provide valuable business insights and teach you business skills that are otherwise learned through trial and error.
“It takes a village. Find a founder or CEO peer network,” said Babatope Awotona, CEO of Calendly. The software company raised a valuation of $3 billion in early 2021.
Awotona also suggested this: “Aim to strike a balance between peers that are currently at the same stage and those that are a few years ahead of where you’d like to be.”
Build a Solid Foundation – Razorpay
While ambition can drive growth, if you go too fast, you could end up crashing and burning.
Follow CEO Harshil Mathur’s approach by focusing on sustainable growth instead. His payment gateway company Razorpay, which joined the unicorn club in 2020, initially concentrated on creating payment solutions for the target market rather than chasing transaction volumes or big valuations.
Big clients take a lot of time and effort to acquire, and even if you do, “your entire bandwidth would go into serving this one large customer,” said Mathur. He advised that startups should focus on smaller clients when starting out and shift focus to bigger clients once your company has the infrastructure and capital to do so.
“The idea is to prove a scalable business model first, and grow from there,” said Mathur.
There isn’t an exact recipe to build a unicorn startup, but following the tips and strategies of existing unicorns can help take your business to the next level. Once you develop a simple, affordable solution to address users’ problems and scale up, you’ll be one step closer to reaching unicorn standards.
If you’re a startup founder that’s looking for advice and inspiration on how to build your team and product, here are 13 lessons from iconic startup leaders to point you in the right direction.
Unicorns are considered privately held startups valued at or over $1 billion. Learn lessons from this elite club of startups and different success factors.