Explained: What is a unicorn, and what does it take to become one?

When was the term first used?

American venture capitalist Aileen Lee is credited with coining the term in 2013. It was used to emphasise the rarity of the emergence of such startups. In an article written for Techcrunch, “Welcome To The Unicorn Club: Learning from Billion-Dollar Startups”, Lee looked at US-based tech companies started since January 2003, to understand — “How likely is it for a startup to achieve a billion-dollar valuation?”

She wrote: “We found 39 companies belong to what we call the ‘Unicorn Club’ (by our definition, US-based software companies started since 2003 and valued at over $1 billion by public or private market investors). That’s about .07 percent of venture-backed consumer and enterprise software startups.”

Are unicorns still a rarity?

From the time the term was first used, it has become more common for startups to bag the unicorn tag, but the $1 billion valuation still gets industry attention, and is considered an impressive achievement. According to PitchBook, a financial data and software company, a convergence of private and market funding is allowing more unicorns to emerge, faster.

What is India’s unicorn record?

During his recent ‘Mann Ki Baat’ radio address, Prime Minister Modi said that a record 44 unicorns were established in India last year during the pandemic. “Not only that, 14 more unicorns were formed anew in three-four months this year. This means that even in this phase of the global pandemic, our startups have been creating wealth and value,” he said.

According to Invest India, the government’s National Investment Promotion and Facilitation Agency, “The year 2021, 2020, and 2019 saw the birth of the maximum number of Indian unicorns with 44, 11, and 7 unicorns coming each year, respectively.”

It adds that between 2015 and 2021, the country’s startup ecosystem has seen a nine-time increase in the number of investors, and a seven-time increase in the total funding of startups.

“We are gradually transitioning from the age of unicorns to the age of decacorns. A decacorn is a company that has attained a valuation of more than USD10 billion. As of May 2022, 47 companies world over have achieved the decacorn status. India has four startups namely, Flipkart, BYJU’s, Nykaa and Swiggy, added in the decacorn cohort,” says Invest India on its website.