Dispelling The Myth: How To Build A Unicorn Startup
If you are a startup or entrepreneur creating software in retail, technology, or financial sectors, take a look at the steps you can take to emulate the success of previous unicorns.
The unicorn: the myth, the legend, and the enigma.
If finding one is a rare thing, then scaling one has got to be even rarer.
In fact, it is estimated that fewer than 1% of startups in the stable get the chance to become a unicorn. Put another way, in 2021, there were fewer than 1000 unicorns worldwide.
You might not fancy the odds, but who would not want to see their privately-owned startup skyrocket in valuation to over US$1 billion? So, if your Dubai-based startup has its sights set on passing the billion-dollar threshold, or just wants to learn from the best, then read on.
There are enough unicorns in the world to learn from and generate meaningful data on some of their common traits. While there is no guaranteed magic formula for breaking the billion-dollar barrier, there are most definitely some proven tactics in the unicorn playbook that you can leverage for your own tech startup.
Let’s start with some key findings, courtesy of FounderKit:
- 87% of unicorns’ products are software.
- 50% of unicorn businesses are in retail, technology, or financial services.
- Two is the most common founding size number (followed by one).
- 62% of unicorns’ businesses are business to consumer (B2C).
- Five years is the average time taken to break the billion-dollar barrier.
So, if you are a startup or entrepreneur creating software in retail, technology, or financial sectors, what steps can you take to emulate the success of unicorns that have gone before? Let’s explore some areas of commonality shared by many unicorn companies.
1. Tech It goes without saying that you are going to need to be tech savvy- not only in the software solution that you provide, but also in your approach to utilizing associated technologies to launch and scale.
Grow your business sustainably and efficiently by taking full advantage of developments in business software, whether that is analytics, cloud computing, or artificial intelligence (AI). Increased levels of automation mean your operations will require fewer resources, and finding ways to personalize the user experience that will serve to build positive customer relationships.
2. Disruption Offer a solution to a common problem with a minimum viable product (MVP) in development. Unicorns, past and present, usually started out by offering a creative, simple, and affordable solution to an issue, by rivalling more expensive higher-end alternatives.
Typically, this means thinking outside the box by offering something with an edge over what the market currently offers. Eventually, as the appeal of the unicorn’s solution becomes increasingly popular, they increase their share of the market to the extent that they become a prominent player, or even the market leader.
3. Customers Everything you do needs to be driven by those you serve. Here’s the thing: it’s not your software solution– it’s theirs. You need a robust value proposition, so your customers know how and why your product adds value for them. Your early iterations need to connect with your ideal customers and users, and your ongoing iterations need to widen the appeal of your product or service.
To that end, it is crucial to create a smooth user experience and obtain regular feedback to ensure your product or service continues to meet the changing needs of your target audience. The trick is to lock-in core users before capturing a broader market.
4. Iteration The unicorn is a light-footed creature, able to move fast and pivot quickly. Iteration is the mother of innovation and improvement. By focusing on core functionality, you can get your product to market quicker, and test user response. Agile development follows a clear cycle of development, testing, and adjustment in-line with user needs. Hence, you can be both proactive and reactive to feedback, scaling your development accordingly.
There is a misconception that iterative development means you are delivering a half-finished product. In fact, iterative development allows you to continuously improve key features, adding new ones to meet the demand and changing expectations of your client base.
5. Investment It is a delicate balancing act, but before you can attract the right investment, you need to have traction and a firm forecast for growth. Timing is key. Your product needs to be marketable, and you also need to demonstrate proven demand before investors will think seriously about funding your business.
Trying to attract funding without numbers is like fishing without bait. Demonstrate that your product or service has viability, and you’re more likely to secure investment.
6. Growth As a startup, when you are working with limited resources, profit is not synonymous with growth. But sustainable growth is synonymous with unicorns. Having a clear roadmap for growth, and being willing to iterate and fail fast, are key components for a unicorn mindset.
For tech companies, it takes on average between six to 10 years to be acquired. By focusing on growth over profit, you will help to build a more sustainable business model. That means you will also need people around you with the same values who are aligned with your business goals. Therefore, as you scale, ensure you hire the right people.
Getting your nose in front
Whilst there is no magic formula for creating a unicorn, it is vital that technology entrepreneurs and startups get the support they need to build sustainable and viable businesses.
A good place to start is a co-working space that encourages collaboration between technology entrepreneurs. This enables you to network with like-minded individuals and potentially unlock new opportunities for growth.
It is also worth exploring potential accelerator programs which can kickstart your startup with much-needed desk space, resources, and investors. Joining a cohort of entrepreneurs on an accelerator program gives you an immediate competitive edge. Some high-profile examples include Sandbox, Techstars, Startupbootcamp, and Plug and Play.
Attending networking and learning events is key in building rapport with established business owners, and for widening your reach in terms of prospective partners, clients, and investors. You will also gain valuable insights from industry insiders.
True, unicorns are rare. But that does not mean you should not learn from existing case studies, and set up your business to replicate those best practices that helped lead them to success.