A unicorn company is a private business that reaches a $1 billion valuation before an initial public offering. Although rare, these corporations are incredibly well known. Some of the familiar American unicorns include SpaceX, Stripe, Airbnb, and DoorDash. While there are more than 41,000 registered corporations worldwide, there have only been 450 unicorns. The majority of these are tech companies, and their frequency is increasing. In 2013, when venture capitalist Aileen Lee coined the term, only 39 companies had reached this status; however, that number has exploded in the past seven years.
Unicorns aren’t created by accident. They have innovative products or services, are geared for rapid growth, and have solid foundations and market demand that spur exponential increases in market share. Regardless of whether your company reaches the threshold to cross into that top 1%, operating like a unicorn can spur tremendous growth, revenue, and profits in a short period. This article will delve into some of the lessons that virtually any corporation can take away from these remarkable unicorn businesses.
What factors make a startup a unicorn?
Several characteristics of unicorns are readily apparent. They’re inherently disruptive. They change the market by taking a different approach, offering a unique service, or shifting consumer views. SpaceX took an arena that had previously only been provided by national governments, and privatized it. DoorDash and Instacart changed the very nature of logistics and delivery. Companies that do business the same way that everyone else does won’t reach unicorn status.
These companies also pursue growth rapidly. Market valuation is a priority from day one, and it’s baked into every goal that unicorns have. Their unique business models, pricing, hiring decisions, and fundraising efforts all revolve around increasing market valuation. Although virtually all companies value market valuation, what makes unicorns stand out is their single-minded focus. Every action they take supports a cohesive end goal.
Unicorns know that market value is gained through market share: either increasing the market’s overall size or capturing it from competitors. Increasing overall market share requires customer awareness, driving heavy marketing, and advertising efforts. Depriving competitors of existing market share typically means undercutting the competition’s prices, driving substantial fundraising efforts to sustain the startup through a period of unprofitability. This is risky, but the potential upside of becoming the dominant force in a given market means the potential reward could be worth it.
Startups have the advantage of flexibility inherently baked into their business models. They start small and agile, outsourcing individual tasks to qualified freelancers, keeping their employee base low, and avoiding many of the encumbrances that come with a larger corporation. They forego retirement options, company-sponsored health insurance plans, and prioritize stock options to incentivize performance over immediate salaries. The very nature of their approach to human resources attracts people who aren’t afraid to work long hours for little pay when the upside is the potential for tremendous profit. From the CEO to the newest employee and from their working hours’ policies to their approach to vacations, unicorn companies unite their efforts toward a common goal.
How to organize your business to operate like a unicorn
Regardless of whether your corporation is striving to be the next unicorn company or revolutionize your target market, there’s a tremendous benefit to having this kind of single-minded approach. A common complaint about many established companies is that various departments, operating units, and employees are all headed in different directions. While they may all be on a somewhat north-facing compass direction, some may be heading northwest while others are pointed northeast. When a company has so specifically defined its path that each employee knows his or her efforts support a well-defined destination, then the increased momentum can be shocking.
These overarching goals are baked into everyday tasks. Annual targets are supported by quarterly goals, which are outlined by a monthly plan that drives day-to-day work. This also requires an attitude of transparency: if something doesn’t matter, employees from the bottom to the top are empowered to speak up and question potentially useless efforts. Politics go out the window, humility is prioritized, and staff members are united in pursuing one concept: finding what works and embracing it.
This is empowering to employees, and one lesson every company should take from unicorns is how they make each employee understand that day-to-day work has a substantial impact. The psychological motivation that people derive from realizing their work has meaning can’t be overstated. It makes them try harder, think more critically, and self-evaluate to align their personal priorities with company objectives. They look forward to Mondays as much as they anticipate Fridays; employees will stay 15 minutes later to complete a task rather than stopping work 15 minutes before the end of the day. When people understand their efforts matter, they make their work matter.
When this environment is in place, it drives accountability without ever setting a formal policy in place. An employee who (a) explicitly knows the direction in which the company is headed, (b) understands how that breaks down into annual, quarterly, and even daily goals, © is empowered to question things that aren’t working or are irrelevant, and (d) and realizes his or her work actually matters will hold himself or herself to a higher standard than a supervisor ever could. The key to accountability isn’t an external approach; it isn’t something for which executives and managers are responsible. The fundamental ingredient necessary to drive accountability is to create a structure where employees want to be accountable because they see the fruit of those self-imposed standards.
Embracing the right business model at the right time
Unicorns aren’t geared for slow, steady growth. They leap on a market opportunity, orient themselves to their customer base and economic operating conditions, and throw everything they have at gaining market share rapidly. Because they’re so oriented for current market conditions, they can ride a wave of customer demand to unprecedented heights. It’s an excellent business model to follow, but it isn’t always the right one to follow. That complete embrace of the current economy could put a company at risk of those market conditions changing.
A company can do absolutely everything right and then fail because something about the market shifts. Increasing government regulations, a competitor that captures a single game-changing feature, or a delay in market introduction can be catastrophic. When the economy is stable and growing, pursuing a unicorn startup mentality can be a winning strategy. When the market is uncertain, it’s better to act like a camel than a unicorn.
Camel startups prepare for the worst instead of orienting themselves for the best. They minimize risk, prioritize stability over exponential growth, and always have a backup plan. While a common unicorn growth strategy is to undercut the competition’s pricing to gain market share rapidly, camels charge a fair price to generate a steady profit stream, establishing them with sure footing.
Unicorns tend to offer a single product or service for which there’s incredible market demand. Airbnb changed the hotel and vacation markets seemingly overnight with one simple service. When the COVID-19 pandemic arrived, that one service was no longer desired, and the company is struggling with an uncertain future. Conversely, camels distribute their offerings so that any market disruptions in one area will be offset by stability in other areas.
At their core, camel and unicorn mindsets are business strategies. Neither is inherently better than the other is, but each is more appropriate within a given context. Accurately interpreting market conditions and understanding the best strategy for your company at a certain point is crucial to ensuring both stable and rapid growth at the right times.
Regardless of which is appropriate for your company at any given moment, however, numerous lessons can be gleaned from how unicorns are made. Setting a unified direction and breaking that target down into manageable goals will propel a company forward with few distractions. Empowering each person to question the “why” behind each task and showing them how their efforts matter drives transparency, accountability, and hard work. Incorporate these elements into your company, and you’ll find a win regardless of industry, economic environment, or shifting market forces.
