Since venture capitalist Aileen Lee coined the term “unicorn startup” in 2013, it’s been a funding fantasia. There’s a new unicorn born every four days. So, you want to build a billion-dollar startup too? Of course you do. It’s a founder’s dream is to join the herd of unicorns — becoming a statistical rarity and household name like Uber and Postmates. But like many things, it’s much easier said than done.
While it seems like successful startups are popping up everywhere, establishing a startup takes a talented and dedicated team, especially when you consider that the failure rate of U.S. companies after five years is over 50% and over 70% after the ten-year mark.
So while it seems that startups emerge from the thousands of entrepreneurs in some Darwinian-like journey, there’s actually some patterns that you might want to pay attention to. In order to better understand unicorn-land and how to model your startup, Embroker put together this guide that dives in the unicorn ecosystem, including factors like geographical placement, industry breakdown and lessons you can apply to your startup — all based on the data.
Below, we’ve highlighted four components for startup success.
Develop a meaningful, ownable value proposition.
Above all else, entrepreneurs aspiring to unicorn-like success need a powerful value proposition that not only differentiates their company from marketplace competitors, but is also makes it easy for their target customer base to understand.
Simply put, a value proposition is the benefit you provide to the people who pay for your product or service. Every brand should have a benefit that the company believes is important to the marketplace and solves a problem customers didn’t know they had.
Pick the birthplace of your unicorn
Location is everything. While a decade ago unicorns were born inside the U.S., today things look a little different — 44% have founding headquarters inside U.S., 37% in China and 19% spread throughout the rest of the globe. Regardless of birthplace, strategizing where to put another office, knowing where the next hot city is or situating yourself in a known tech hub can be a helpful component to acquiring venture capital.
Know what kind of unicorn you want to make
While it helps to be in the right location, a more important factor to consider is industry. This is a decision not to be taken lightly, and it is important that you focus on the long-term, or you might enjoy success for a few years and then a decline.
If you want to make sure that you are betting on the right horse, it’s important to consider the following:
- Your expertise
- Projected industry growth
- Regulatory environment
Looking at the leading unicorn as a whole, it’s possible to pick out patterns and see which industries have historically dominated the club. The bulk of unicorns exist within four different spaces, fintech (12% of all unicorns), eCommerce (11%), internet software (9%) and on-demand (6%).
Now, this doesn’t mean you funding outside of these industries is impossible. Startups have flourished in industries ranging from like 3-D printing and entertainment to HR tech and even tech for kids and babies. So, while there are specific hot industries and investors may focus on them looking for a big opportunity, that doesn’t mean the only valuable idea is one in one of the top four categories.
Founding Team Size
The last point we’ll cover here is the size of your founding team. Should you go at it solo, take on a co-founder, or establish a founding team? Unfortunately, there’s no single answer to this question, a look at the top 23 unicorns can help you pick out a trend in founding team size — nearly all are under 10 founders.
In fact, the majority range in the one to two people team size. One school of though is that the disagreement, stress and conflicts that inevitably come with the startup journey are more easily resolved with a smaller founding team.
On the flip side, two heads are better than one, and starting a business (a successful one at that) requires a variety of skills that few people possess on their own. In this case, having two or more founders can help make the representation of that entire skill set more complete.
To learn more about tips from startup leaders and how to navigate the unicorn ecosystem, check out the full unicorn startups guide here.