Every startup begins with a good idea (or it should), and with patience, hard work, and more than a little luck, that good idea can snowball into success.
Starting the business is easy; it’s keeping it going and scaling successfully that’s the real test. With a failure rate of about 90%, many startups don’t make it. In the tech startup world, it’s even more cut-throat, with the highest startup business failure rate at 63%. But for the few lucky ones, the dream of creating a thriving business becomes a reality.
What’s more, the cream of that crop may even go on to reach unicorn status, the coveted term describing privately-held startups with valuations over $1 billion. The term emphasizes the rarity of these startups – in a field where the odds are far from in your favor, some founders and startups still manage to rise to the very top, becoming household names and earning a spot in the enviable ‘unicorn club.’
If you want to claim a stake of your own in the 10% of startups that achieve and blow past the markers of unicorn status, here’s what you’ll need to know.
What It Takes To Be a Unicorn:
Becoming a unicorn is no walk in the park – it’s a mix of a favorable environment, a solid product-market fit, the right founding team, unwavering dedication, and capital and personal investments. Unicorns also share certain characteristics that help them make waves in the market and continue to build their value to consumers over time.
To improve your odds of success, take a page from the unicorn club and learn what it takes to reach unicorn status.
1. Industry Disruption
In this case, disruption is a good thing, a very good thing. In entrepreneurship, this term refers to industry innovation that radically changes the way the market or its players operate. Disruptors tend to get their foot in the door toward the bottom of the market with simpler, more accessible solutions that compete with higher-end products. Their affordability and value make these solutions increasingly attractive to consumers, and gradually, the business makes its way up the market, revolutionizing the industry with a valuable alternative to the status quo, and potentially even dominating it.
Netflix is the perfect exemplar of disruption of an industry, first by offering direct-mail DVDs sent automatically on a queue in a world that was still going to the video rental store, and then by offering affordable at-home streaming services that are now the new standard.
The root of disruption is creativity. To be a unicorn, you’ll need to get creative — with your solution, your business model, your marketing strategy. Think outside the box.
2. Leveraging Technology
More often than not, today’s unicorns rely on innovative tech to help the business provide a unique solution that can scale. Nearly 87% of unicorn startups today sell software-based products. Technology brings progress, and progressive startups are the ones with the most potential to reinvent the norm. Some of the most commonly utilized technologies in unicorn startups include AI, robotic process automation (RPA), cloud computing, and mobile apps.
3. Adding Value to Consumers
If you want your business to become a unicorn, you should be selling to consumers, not other businesses. Over 60% of successful unicorns rely on this B2C (business-to-consumer) model.
The best way to add value to consumers is to solve a regular problem, improving and simplifying their everyday lives. The market doesn’t need to include everyone, but it should bring value to a specific target audience, using UX design principles to make it intuitive and easy to use.
This is the foundation of your value proposition, which will guide both your sales and marketing initiatives and help elevate and differentiate your startup.
A startup that turns into a successful small business is on the right track, but if it doesn’t have an integrated growth culture and the framework to scale at a high rate, it won’t get much further off the ground.
Strategic, ambitious growth goals and a clear vision for the company will guide the way. Then, with this laser focus on the future, validate your marketing and sales efforts with testing in one region and replicate what works in other regions to eventually expand your reach worldwide. Startups based on technologies provide a helpful structure to scale easily, but it’s important to go step by step to ensure steady growth.
Going From Regular Startup to Unicorn Status:
Evolving from one of the millions of startups to a one-in-a-million unicorn follows a specific process, from solving a real and permeating problem, testing solutions, creating a prototype, selling to the immediate market, and scaling from there.
While following these steps can’t guarantee unicorn status, it will help you understand the strategies startups use to become successful.
1. Solve a Problem
The most valuable startups begin with a problem that many people deal with. Ideally, you understand the problem well and are likely even impacted by it.
Think about the everyday challenges you face, then find a better solution for them. Brainstorm potential ideas and then compare the opportunity size, your capability to produce the solution, and where your experience lies.
2. Test What Works and What Doesn’t
Never guess. Instead, test. Assuming you know what works and doesn’t work for customers will put you in a bad place with your startup. Using A/B testing breaks customers or potential customers into segments and tests a different idea on each group. You can gather valuable insight from testing results and determine what idea and approach will generate the best response.
There’s a great quote from one of my favorite books, Lean Startup by Eric Reis, that says, “The only way to win is to learn faster than anyone else.” This goes back to the dire importance of testing. It works like compound interest. The faster you can find ideas, test the ideas, and figure out which ideas are working and you can move forward with, the faster the success of the idea will grow, and the more likely you are to beat out the competitors.
On the other hand, taking bad ideas off the plate can also behave like compound interest. By not spending your time on things that aren’t worth it, your time to work on the wins expands exponentially. Take your testing (and your learning) very seriously.
3. Build Your MVP
With data to back up your idea, begin building a prototype, or minimum viable product (MVP). Remember what your customers told you about what would be most valuable and functional to them during testing and incorporate these features. You can repeat testing and MVP modification until you get a resoundingly positive and urgent response. “I need this now” is what you want to hear.
4. Sell to Immediate Buyers
Making it this far is a feat in itself. To continue, develop a strong sales and marketing strategy to dominate the initial market. Tailor it to what your current customer needs and wants. You don’t need to immediately look to expand your markets. Instead, follow the money. Speak to your current buyer’s pain points with effective advertising, utilize social media advertising to be seen by younger generations, hire a sales force, and do what needs to be done to get some initial traction.
On that note, you should also be perceptive to negative feedback you may get. Don’t get too steeped in your own idea that you can’t admit the market may not be receiving it well. Instead, use the market as a guide. Focus on what’s picking up traction and roll with it, and pivot away from paths that aren’t generating the results you’re looking for so you don’t get stuck in a false peak.
5. Expand and Scale
To scale, you’ll need to expand and go further than your local market. Finding a market with large enough revenues and a sizeable share of opportunity will set you up for success. Companies in Europe tend to head to the U.S., for example, while U.S. companies may expand into Asia and Europe. From there, continue growing your company by hiring more people and adding more markets to your reach.
Examples of Unicorns Today:
Legendary and rare, tech unicorns exemplify the best of the best innovation and strategy and often become household names that become integral in our lives. Some of the top unicorns today that have surpassed the $1 billion valuation threshold include:
- SpaceX – SpaceX, short for Space Exploration Technologies Corp. is a name everyone knows. It was founded in 2022 by Elon Musk to reduce the costs of space exploration. SpaceX has claimed many firsts, such as being the first private company to successfully launch a rocket into orbit, and the first to send an all-civilian crew to space. It’s currently valued at over $100 billion and includes investors such as Fidelity and Founders Fund.
- Robinhood – Robinhood disrupted the old guard of the wealth management sector, competing with giants such as TD Ameritrade with its mobile-based, user-friendly online brokerage platform that empowers individuals to invest and trade assets such as cryptocurrency and stocks without charging them a commission. Robinhood brought investing to the people in a fresh new way, and it’s now valued at over $5 billion because of it.
- Instacart – Instacart took off in early 2020 after the pandemic hit, providing customers throughout North America with grocery delivery services. It hit unicorn status far before that, in 2014, however, and is now worth $39 billion. Over 10 million customers strong, Instacart found a new way to improve the logistics and delivery model and it shows.
- Grammarly – Grammarly provides online grammar-checking software that goes beyond simple grammatical technicalities and helps writers adjust and moderate the tone and delivery of what they’re saying based on things like who the reader is and what kind of message they want to convey. After a $90 million funding round in 2019, Grammarly hit unicorn status. Its biggest asset is its integrations, as you can use the tool across platforms such as Google Docs, Microsoft Office, and various browser extensions seamlessly.
Developing a Recipe for Success
While there’s no “unicorn status” recipe you can follow prescriptively to repeat the success of unicorns like Uber and SpaceX, incorporating the characteristics and emulating the processes of unicorns that have gone before you will increase your odds of a favorable outcome.
Seek out disruptive, tech-based solutions that solve real problems, bring value to your target audience, test and test again, and then scale as you develop traction.
Be prepared for the challenges that come with turning your dream of startup success into reality. Stamina is non-negotiable. Innovation is crucial. Resilience is paramount. It’s a marathon, not a race.
A key ingredient to success is finding the right investors that believe in your solution and can bring the capital and the mentorship needed to scale exponentially. If you’re on your way to unicorn status and are looking for the right investor to fuel your progress, reach out to MacDonald Ventures.