A couple of weeks ago I posted a lot on social media about unicorns. After some thought, I realized that many first time entrepreneurs might not know what a unicorn is, and no I am not talking about the ones in fairy tales. This post is to help those unfamiliar with the term understand its meaning as well as provide analysis and insight to the current unicorn boom.
What is a unicorn?
A unicorn is a private company that has reached a $1 billion valuation.
how many are there?
Despite their name, unicorns are not fictional, and they are not that rare anymore. According to Pitchbook, there are 138 unicorns located in the United States, and the number keeps growing. 2018 is on pace to be a record year in venture capital raises, funds, and company valuations.
This is good right?
If you are a company that is past your Series A and is either a unicorn or in unicorn territory (approaching the $1 billion valuation mark) this is great news. VC’s seem obsessed with unicorns these days, and many are focusing all or a majority of their funds for follow on rounds in these companies. However, that means there is not much to go around for the little guys. Many startups are having a hard time finding Series A funding because of this trend.
what happens next?
It’s hard to say if these types of valuations, super funds, and large rounds are sustainable. All good things must eventually come to an end. If VC’s want to keep the wave going, they need to focus more on the little guys with great potential who can get them a great return on their investment without such astronomical valuations. Afterall, like their fictional counterparts, unicorns are supposed to be rare.