The world of unicorns has changed over the last year – and the public markets, especially in the technology sector, seem to have taken a special dislike (some perhaps just for the short term) of overpriced valuations, slower than expected growth rates, widening negative EBITDAs, and far and wide reaching geopolitical impacts.
Naturally, that impact flows to the private markets, and especially onto these “unicorns” where private clearing-houses are seeing a spike in sellers, investment firms are writing down the values, and talk of profitability and rational growth is increasingly heightened. Irrespective, most of the 150 or so ‘unicorns’ are highly successful, disruptive and ubiquitous.
Background and Context:
A few years ago, start-up unicorns were a rare sighting in the technology scene. Reaching the billion-dollar valuation mark was reserved only for the top echelon of industry disruptors, so much so that not even Google or Amazon, as privately held companies, reached that valuation ($1 billion or more).
Today, however, unicorns have become ubiquitous, and they touch many parts of our personal and professional lives. From reading front-page headlines, to online apps and tools, to innovative transportation solutions, unicorns are all around us.
According to CB Insights, there are currently 144 companies around the world that are valued at $1 billion or more, representing a cumulative valuation of $508 billion. And as if reaching the billion-dollar club wasn’t a lofty enough goal, many companies have now set their sights on reaching a new milestone; the double-digit billion-dollar mark, a category now referred to as the decacorns.
Having spent the early part of my working life in Asia and having seen closely the early power of disruption on those markets, and now having watched various cycles over the last 2 decades in Silicon Valley, I find the exponential growth of the unicorn population interesting. These unicorns not only have thought of a new idea or a new way of doing something, but they have built and scaled a business in the most global, mobile, social, cloudy risky landscape ever. Apart from some of the more typical challenges that start-ups face, the success or failure of these tech unicorns has been largely based on critical factors such as rapid customer adoption, evolving consumer trends and behaviors, new service needs, meeting and/or exceeding investor commitments, and a highly aggressive and often “copycat” competitive marketplace.
While there are arguably many mistakes that these unicorns have made along the way, there are many more things they have done right, and continue to do right.
If you are an aspiring unicorn, take note:
1) Ride the wave change of societal, consumer or enterprise change
Most unicorns are at the forefront of a natural change happening in the market, and in fact are oftentimes the ones helping to create that change. It could be societal change related to liberalization, religion, politics, the need for new modes of communication, and economic changes – just as an example, look at the shared economy companies and communication/messaging companies that have taken off. Changing or value driven consumer preferences have also been the life-blood of companies like Uber, AirBnB, Xaomi, Flipkart, Spotify, and dozens of others. In the enterprise world, the velocity and impact of large volumes of data being created and consumed, or the deep desire for simplicity in business applications have also helped companies like Palantir, Stripe, SurveyMonkey create significant traction quickly.
Lesson: The most successful unicorns typically do not chase ‘cute concepts’ but rather try and get into the center of ‘real-demand’ and disrupt, or substantially improve the way certain things are being done by consumers or enterprises. Value, efficiency and simplification are typically the biggest drivers of rapid and continued success.
2) Establish leadership tone at the top, with a focus on speed and agility
It’s not easy being in a leadership position at a fast-growing start-up, and when the company reaches unicorn status, the stakes get even higher. Looking at the unicorns of today, I see a few common attributes when it comes to talent acquisition and retention. These companies hire fast, scale fast, expand fast, and innovate even faster. Having a truly transformational product or service is very important, ultimately however, the success of these companies depends on the unwavering vision and execution of its leadership team. These leaders have a unique blend of high conviction for their cause, and an ability to swiftly pivot and keep pivoting as they hit the ‘sweet spot.’ Rarely have large multibillion dollar enterprises been created having been narrowly fixated to the original concept. These leaders have the ability to constantly understand the changing market, political, competitive and capital dynamics and execute swiftly to it. Customers have been the center-point of their focus in most cases.
Lesson: Unicorns have successful leaders who are highly visible, communicate a clear vision for the company, are deeply committed to the cause and can pivot quickly.
3) Instill a Unique Corporate Culture
With high valuations, it’s no surprise that unicorns incentivize and reward their talent exceptionally well. Apart from strong salaries, in order to attract and retain the best talent, companies realize that they must offer more than just great pay and in-demand office perks.
In this regard, unicorns are re-writing the rules of corporate culture by creating unique benefits and incentives to drive engagement, happiness, and satisfaction in the workplace. Moving offices to more central and trendy locations for a younger workforce, innovation around employee stock option schemes, non-standard paid time off policies, encouraging special projects outside of an employee’s typical “day job”, and encouraging risk-taking are all examples of things these companies are doing to deviate from regular norms, and build highly motivated and charged up organizations.
Lesson: Unicorns are challenging the status quo by leading the way in defining the workplace of the future. They recognize that employee happiness and satisfaction translates to better productivity, better products/services, and better customer service. Unicorns are moving towards catering to tomorrow’s workforce needs today.
4) Do Not View Risk as a Four-Letter Word
The difference between a successful company and one that falters is often its ability to view risks as opportunities, rather than business-limiting circumstances.
Take for example the competitive landscape – what is typically viewed as a dangerous risk by many, is considered a lucrative opportunity by unicorns. For example, in an interview with CNBC, Ryan Graves, head of global operations for Uber, discussed the impact of top competitors like Lyft. He commented, “I like the competition. I think it’s good for us. It keeps us on our toes, and makes sure that we’re focusing on the right things. When you use Uber versus any other competitor, you’re going to see the things we focus on.”
At the other end of the spectrum, the decision to go public is a major risk many companies grapple with, mainly due to the disappointing debuts of some of the unicorn club’s most promising members. Yet, unicorns are seeing past these risks, and are viewing market validation as an indicator of longer, more fruitful success. Mark Benioff, Salesforce CEO and serial unicorn investor, has credited FitBit in particular for getting the market’s stamp of approval by going public.
Lesson: Companies don’t become unicorns by playing it safe. Despite risks and tough competition, unicorns recognize that there are vast opportunities to reach new markets, evolve consumer behavior, drive new innovations, and disrupt whole industries by taking calculated risks.
5) Leverage Investments to Scale up Quickly
In the unicorn club, scaling up doesn’t mean burning through cash as fast as possible in order to turn a profit. Instead, it means thoughtful and laser-focused investments and execution, firing on all cylinders to drive both current and future success. This includes everything from investing in aggressive R&D efforts and building strong and loyal customer bases, to expanding global partner footprints and ecosystems, in order to help drive the sales cycle and reach new markets faster.
By providing greater visibility into how new funding will be leveraged, unicorns are creating both transparency with stakeholders as well as valuable media coverage to generate buzz. Most importantly, it allows their customers, partners and suppliers to understand that they are serious about their vision and execution.
Lesson: Unicorns know better than to rest on their laurels. Every second wasted is an opportunity for a competitor or an emerging start-up to get bigger, faster, and stronger. Unicorns have a defined strategy in place and put capital to work from the get-go, focusing not just on current needs, but future market opportunities as well.
Some might argue that unicorns are oversaturated, overhyped, and overvalued, and frankly, many of them might be. Yet, despite their unexpected growth in numbers, there is still something extremely rare and magical about companies that have gone from zero to a billion in, seemingly, the blink of an eye. Other start-ups waiting in the wings can certainly benefit from studying unicorn best practices and attributes in order to disrupt, lead, and demonstrate sustainable business performance for the days, months and years to come.