From entrepreneur to unicorn company: a First Wealth guide

The UK has just seen two record years for start-ups – a staggering 800,000 in 2020-21 plus 753,000 the following year; only a tiny fraction will achieve unicorn company status. That’s industry jargon for a $1bn (or £700m) valuation. We look at what it takes to stay the course.

What is a unicorn company?

Ten years ago the American venture capitalist Aileen Lee coined the term unicorn – referring to the rarity of start-ups that achieve a billion dollar valuation within ten years, while remaining in private hands.

A decade on, the UK is now home to 122 unicorn start-ups – from Brewdog to Zoopla. We’re faring pretty well globally, thanks to the sheer number of new companies, a business-friendly environment, the availability of good-quality advice, and access to funding and finance.

Will any of the 1.5m odd UK companies launched in the last few years make it that far? The odds suggest only a tiny fraction will. Perhaps it’ll be your business?

Whatever your hopes and plans, there are some things about unicorns that you might find useful to know.

What makes a unicorn?

A unicorn company is almost by definition different. After all, they’re exploiting gaps in markets with exciting new ideas, delivered with dynamism and drive.

But they also have a few things in common.

They tend to disrupt. Marshmallow uses artificial intelligence to calculate risks and offer personalised insurance solutions. Revolut and Monzo have taken on the rather sleepy world of retail banking. Cazoo makes it much easier to buy or sell a car. And Zoopla does the same for houses. Each of these has challenged conventional thinking about a given sector.

They tend towards B2C, not B2B. This is where potential investors focus on SAM – or service available market – and SOM –share of market. A consumer-focused offering will almost always have a much bigger SAM, simply because there are more consumers than businesses. And scale counts for unicorns.

They tend to grow quickly. It takes about five years for a unicorn to reach that billion dollar level. This velocity requires multiple rounds of funding, in short periods of time.

Milestones to unicorn status

Funding and finance – plus the right advice – are vital to success.

Before you seek funding. It’s crucial to get the right expertise in place. This will help you select the right sector to operate in, conduct appropriate research and define future buyers.

It’s also important that your employees believe in – and trust – your leadership and advisory team. This will help you get the organisational culture right.

It’s never too early to start building relationships with investors. Use your support network and external advisers to help you network appropriately and identify future financial backers. There’s also a balance to be struck between bespoke approaches – to individuals and organisations – and general visibility – at conferences, on LinkedIn, in the trade media.

Once you’ve identified investors, you’ll need a compelling pitch, demonstrating not just your commercial strategy but also your fundraising strategy. And – if you’re going for pre-seed funding, or early investment solely in your idea – you’ll need to pitch your unique selling point with the utmost clarity and concision.

Your fundraising strategy should include plans for seeding, market entry (known as series A funding), growth stage (series B) and expansion, perhaps into new sectors or markets (series C).

Avoiding derailment

Coming off the tracks is easy. Despite the record number of start-ups in 2020-21, a remarkable 81% of them failed to survive just one year.

Of course, you might survive the first year only to find more obstacles further down the line: poor financial planning, poor decision making, competition, and unforeseen issues like new laws or regulations, adverse economic conditions, and ill health.

Not for nothing does just a tiny fraction of a percentage make it unicorn status.

Avoiding derailment involves healthy doses of luck, in the face of unforeseen events. But, as any unicorn owner or investor will attest, it requires much larger dioses of perseverance, adaptability, flexibility, and a willingness to listen to your advisers – no matter how uncomfortable their counsel.

Aileen Lee recently posted that she, “definitely did not predict how the [unicorn] term would take off, or how much bigger and impactful the ecosystem would become.”

That ecosystem of finance, advice and support is there to help you.

[1] https://techcrunch.com/2023/11/08/aileen-lee-unicorns-interview/?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvLnVrLw&guce_referrer_sig=AQAAAKy0cuDwE0dno2AIL1WoTIGHFZfN0JsKnQccZronACdFWWXxxTEYsS15oiHpkLAhqkLXAXvSMfdn9s3OKbL8NZeSvV0RwOEpneySIfIR-CYy6DuZC5gzus7cnd—vBicqByzfBZ45uWMpQajpCQ4BeSvG1ZfVEGjiZMPzpcUNXm

[2] https://profiletree.com/uk-business-startup-statistics/#:~:text=The%20largest%20number%20of%20startups,March%202022%2C%20with%20753%2C168%20companies

[3] https://startupsoflondon.com/the-complete-list-of-unicorn-startups-in-the-uk/

[4] https://www.hrmguide.co.uk/sme/unicorn-startup.htm#:~:text=What%20do%20unicorn%20companies%20have%20in%20common%3F&text=A%20five%2Dyear%20build%2Dup,longer%20to%20reach%20their%20goal.

[5] https://profiletree.com/uk-business-startup-statistics/#:~:text=The%20largest%20number%20of%20startups,March%202022%2C%20with%20753%2C168%20companies

[6] https://www.linkedin.com/posts/aileenwlee_10-years-since-the-term-unicorn-was-coined-activity-7126380025188134912-FKYJ/?trk=public_profile_like_view

This document is marketing material for a retail audience and does not constitute advice or recommendations. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.