What is a unicorn start-up company?
Lately, more and more articles are writing about innovative start-ups and about start-ups that have become international unicorns, but what does a start-up or a unicorn mean? In the following, we will try to clarify the meaning of a start-up and how it can become a unicorn.
What is a Startup Company?
The definition of a start-up is: Start-ups are companies or ventures in the first stages of operations that are focused around a single product or service that the founders want to bring to market. Start-ups are usually created by entrepreneurs who want to implement a unique idea or project to solve a problem they have identified and believe there is a demand for it. These companies typically don’t have a fully developed business model and, more crucially, lack adequate capital to move onto the next phase of business. Most of these companies are initially funded with an intense passion, not with money!
Start-ups are rooted in innovation, addressing the deficiencies of existing products or creating entirely new categories of goods and services, thereby disrupting entrenched ways of thinking and doing business for entire industries.
You may be most familiar with start-ups in Big Tech—think Facebook, Amazon, Apple, Netflix, Google.
How Does a Start-up Work?
On a high level, a start-up works like any other company. A group of employees works together to create a product that customers will buy.
The difference between a start-up and a regular company is the way they approach the business. Ordinary companies duplicate and slightly improve what is already on the market, which means they operate on an existing model of how a company should run. A start-up, on the other hand, aims to create an entirely new and innovative template.
Another critical factor in differentiating a start-up from a typical company is speed and growth. Start-ups usually start with a product framework, called the Minimum Viable Product (MVP), which will test and review until it is ready to enter the market. Even after launch, start-ups continually improve their products by feedback and usage data.
In improving products, start-ups are also looking to quickly expand their customer base, thus reaching larger market shares, which will allow them to raise more funding and develop more products. All these processes have a specific purpose: publication on the stock exchange.
How Are Start-ups Funded?
By their nature, start-ups are initially funded by the founders or their friends and families. After the products developed by them reach the market and gain visibility on the market, start-ups can obtain funds through several rounds of financing:
- The preliminary round of financing, as mentioned above, comes from friends and family who invest in the business idea.
- After that comes seed funding from so-called “angel investors,” high-net-worth individuals who invest in early-stage companies.
- Next, there are Series A, B, C, and D funding rounds, primarily led by venture capital firms, which invest tens to hundreds of millions of dollars into companies.
- Finally, a start-up may decide to become a public company and open itself up to outside money via an IPO, an acquisition by a particular purpose acquisition company (SPAC), or a direct listing on a stock exchange. Anyone can invest in a public company, and the start-up founders and early backers can sell their stakes to realize a significant return on investment.
How Do Start-ups Succeed?
A large number of stars fail in the first phase. However, to be successful, a start-up should follow seven essential steps:
Step 1: Market Research
Step 2: Customer Validation
Step 3: Product Validation
Step 4: Product Development
Step 5: Customer Development
Step 6: Product Launch
Step 7: Business Growth
How can a start-up become an international unicorn?
Even if the term unicorn may seem confusing at first glance, the definition of a unicorn is as simple as possible:
“Unicorn” is a term used in the venture capital industry to describe a privately held start-up company with a value of over $1 billion.
The term was coined in 2013 by venture capitalist Aileen Lee, choosing the mythical animal to represent the statistical rarity of such successful ventures.
That being said, we can conclude that a start-up can be considered a unicorn when its value exceeds 1 billion dollars.
According to a report by CB Insights, in August 2021, there are more than 700 unicorns around the world.
LIST OF TOP 10 UNICORN COMPANIES 2021:
BYTEDANCE; STRIPE; SPACEX; DIDI CHUXING; INSTACART; UIPATH; GLOBAL SWITCH; DATABRICKS; RIVIAN; NUBANK.
Following the increasingly frequent use of the term unicorn, two new terms used in the investment world have appeared: Decacorn (companies over $10 billion) and Hectocorn (valued at over $100 billion).
Which are the Romanian companies that have chances to become international Unicorns?
Romania has great potential to become one of the most vibrant innovation hubs in Central and Eastern Europe. Here are the ten most promising companies in Romania that can become international Unicorns: TypingDNA; FintechOS; teleportHQ; Questo; Elrond; CyberSwarm; SmartDreamers; Nifty Learning; TalentBrowse; XVision.
More examples of unicorns
Some familiar U.S.-based unicorns include Uber, Airbnb, SpaceX, Palantir Technologies, WeWork, and Pinterest.
EU-based unicorns: Revolut; Bolt; Blockchain.com; Epidemic Sound; BitPanda; Gorillas; KLARNA, and many more.
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