Hey readers! You might me thinking that I’ve gone insane and must be thinking what Unicorns have to do with my blogs. But don’t worry, you might find this blog as informative as you would have found my other ones. For the fact about Unicorns, yes, they do exist in the business world, but for the real world I can’t say for sure. Let me tell you how this term is related to business world. Unicorn is the term used in venture capital industry and is used to describe a privately held startup company having a valuation of over $1 billion. This term was coined by the venture capitalist Aileen Lee, founder of Cowboy Ventures in California.
“Welcome to the Unicorn Club: Learning from Billion-Dollar Startups,” by Aileen Lee, was the first article about unicorns in the venture capital market. She looked at the software businesses started in the 2000s and discovered that only 0.07% of them ever reached a $1 billion value. She added that $1 billion-plus startups are so rare to find that discovering one is as challenging as finding a unicorn. And hence the term “UNICORN” is coined. Alphabet Inc. was the first ever Unicorn till 1990s followed by its subsidiary, Google Inc. which was valued as more than $100 billion dollar company. Also, companies with the valuation of over $10 billion are sometimes referred to as “Decacorns”.
The startups that valued more than a billion dollar were a rare sight in early 2000s but not anymore. There are more than 600 Unicorn startups in the world with a total market capitalization of just below $2 trillion and out of which 52 are Indian Unicorn startups, making India world’s fastest growing startup ecosystem. The potential reason behind this is that startups have to raise funding for their growth in different phases starting from phase A, B, C, late-stage investors and ending at IPO issue. So, the late-stage venture capital investors are very enthusiastic and eager to invest in the startups that have crossed the first three barriers as they didn’t want to lose the opportunity to invest in a potential Unicorn startup. Of course, they do the background research and analysis, but at the same time are wiling to take some degree of risks when it comes to software, IT and tech companies. Hence, the increasing number of Unicorns.
This seems like a great investing opportunity and no one wants to discard this. But, to invest in such companies you wither need to be a venture capitalist or a private investor with loads of money, because the capital raised by these startups is quite high and they don’t really accept small or moderate denominations. But, if you still want to invest in such startups, you could wait for them to get listed on the stock exchange. You could see the recent example of Zomato, the first Indian Unicorn startup to go public and people who got the IPO allotment have doubled their money on its first trading day only.
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