Factors Contribute to the Growth of Unicorn Companies

A unicorn is a privately owned startup company valued at at least USD $1 billion or more. Aileen Lee, founder of Cowboy Ventures, initially used the phrase to refer to the 39 unicorns — startups valued at more than USD 1 billion.

The term ‘unicorn’ was originally used to show how rare billion-dollar businesses were. While the definition of a unicorn startup has stayed the same, the number of these companies has grown significantly. By 2024, there will be more than 1,549 unicorns around the world, spread across 53 countries and 291 cities. These companies have several unique factors that set them apart from other startups.

This article breaks down the main factors that help unicorn companies grow. Let’s get started.

Factors Contributing to Unicorn’s Growth

Five factors contributing to unicorns that anyone should know.

Grabbing Market Opportunities

Startups that bring revolutionary products or services to the market by utilizing technology or changing traditional business models are more likely to grow into unicorns and grow larger in numbers. These innovations often touch customer pain points in a way that traditional players usually find riskier to do. Unicorn companies position themselves in a large, growing market trying to fulfill a radical need.

Companies like Airbnb and Shopify identified gaps in their markets in accommodation and e-commerce and went on to become unicorns by filling the gap.

Starting the business in 2010, Uber used a new business model: all taxi drivers were contractors, not staff. Therefore, they could offer taxicab rides cheaper than traditional taxi service providers. Using this innovative business model, Uber succeeded and became a unicorn in such a short period.

Capital Inflow from Venture Capital and Private Equity

Since unicorns focus on the latest technology and market trends, they can attract funds from Venture Capital (VC) firms and private equity investors. Also, most unicorns tend to raise funds even after reaching a $1 billion valuation. This will then enable them to design their future growth so that they can capture market share and really scale up their operations without any pressure to go public soon.

Such is the case with Stripe, a SaaS B2B space in the fintech network, which emerges as the second-most-valuable unicorn startup with a valuation of $95 billion worldwide. Its key investors include Thrive Capital, General Catalyst, and MSD partners, which have enabled the startup to scale its international operations while ensuring its position as one of the most valuable unicorns globally.

Market Timing

One more factor that helps unicorns grow is the timing of the market. Startups have planned entry to markets at the right time, or rather when the time is right: consumer demand is growing, and the disruption in traditional industries is taking place.

A classic example would be Instacart, which had the highest valuation of 39 billion in 2021 due to the COVID-19 pandemic. Though the company’s valuation dropped in 2023, the timing of their business model helped secure high valuations when physical stores shuttered and customer preference shifted towards online shopping.

Marketing timing also plays a significant role in increasing green tech unicorns. Growing concern for climate change and intensified regulatory pressures on carbon emissions create a perfect soil for clean energy startups.

Northvolt, the Swedish battery producer, became a unicorn by taking advantage of the rise in demand for electric vehicles (EVs) and the urgency for clean storage solutions. By 2024, Northvolt’s valuation is over $12 billion.

Leadership and Team Expertise

A unicorn has excellent talent and visionary leadership behind it. Experienced, strategically aware, and knowledgeable founders who understand the industry are generally likely to scale their companies into unicorns. Additionally, building sustainable businesses requires a strong management team that can navigate the hyper growth challenges.

Canva is an example of a unicorn that grew because of its excellent leadership. Founded by Melanie Perkins, Canva is a design software offering with a valuation of $40 billion as of 2024. It was Perkins’s ability to draw in top talent, the founder’s product development skills, and the delivery of user-friendly platforms that made Canva a unicorn in such an effective manner.

Another example of a unicorn startup’s team expertise is ByteDance, the parent company of TikTok. This is an excellent example of the difference that having a good team can make. Zhang Yiming founded ByteDance and put together a solid team of engineers, product managers, and business strategists that catapulted TikTok into a global phenomenon. Today, ByteDance is valued at $225 billion and is one of the most valuable unicorns in the world.

Favorable Regulatory and Market Conditions

Favorable regulatory environments are critical in helping unicorns grow. Countries providing a proper business ecosystem, tax incentives, and minimal regulatory barriers seem to create the right environment for startup growth.

For instance, the U.S. and China have been at the forefront of unicorn creation due to their massive domestic markets and easy access to capital and regime support.

The United States remains the largest unicorn center in the world, with 653 unicorns, including major players like SpaceX, Epic Games, and Databrick. American unicorns have all the factors that could enhance a venture capital industry, a culture of entrepreneurship, and good corporate tax policies to encourage innovation.

China’s unicorns were created at a slower pace due to regulation tightening, especially in fintech and edtech. Despite all these, China remains the world’s second-largest hub, with more than 243 unicorns as of 2024.

Catalysts Behind Unicorn Expansion

Although the road to unicorns may be long, the right factors can quickly turn companies into successful ones. One hidden aspect of a startup’s growth is proper company valuation. Properly valuing your startups will enable you to scale the business, make funding easily possible from any investor, or even plan for an exit.

Eqvista helps deliver an accurate and precise company valuation through our advanced valuation processes. We provide overall solutions to a company, covering cap table management, equity tracking, and 409a valuations that will streamline the determining of worth for your company.

Whether for fundraising, issuing stock options, or pursuing your unicorn goals, we at Eqvista help you make necessary business decisions across your company’s growth stages. Want to know more about our services? Contact us Today!