In the lexicon of modern business and venture capital, few terms are as widely recognized—and frequently misunderstood—as the “Unicorn.” While the word suggests mythology, in the economic landscape, it represents a very specific and tangible financial milestone.
For entrepreneurs, analysts, and students of the economy, understanding what qualifies a company as a Unicorn is essential for grasping the dynamics of the global startup ecosystem. This article provides a comprehensive definition of the term, its origins, and the economic criteria involved.
Defining the ‘Unicorn’ in Business
A Unicorn is a term used in the venture capital industry to describe a privately held startup company with a value of over $1 billion.
To fully understand this definition, two specific criteria must be met:
- Valuation: The company must be valued at $1 billion USD or more.
- Status: The company must be private. Once a company goes public (through an IPO) or is acquired by another entity, it technically ceases to be a “Unicorn” and becomes a public company or a subsidiary.
The Origin of the Term
The term was coined in 2013 by Aileen Lee, the founder of Cowboy Ventures. In her analysis, she looked at software startups founded in the 2000s and found that only 0.07% of them ever reached a $1 billion valuation. Because they were so statistically rare, she likened them to the mythical creature.
Today, while the number of Unicorns has increased significantly due to changes in the global economy, the term remains the standard benchmark for high-growth startup success.
Variations: Decacorns and Hectocorns
As technology companies grew larger and faster, new terms were invented to classify startups that far exceeded the $1 billion mark.
- Decacorn: A privately held startup valued at over $10 billion. ( Prefix ‘Deca’ meaning ten).
- Hectocorn: A privately held startup valued at over $100 billion. ( Prefix ‘Hecto’ meaning hundred).
Examples of companies that reached “Decacorn” status while private include heavyweights like SpaceX and Stripe.
Valuation vs. Revenue: A Critical Distinction
A common misconception is that a Unicorn company generates $1 billion in revenue (sales). This is incorrect. The term refers strictly to valuation.
Valuation is an estimate of the company’s worth, typically determined during a funding round. For example, if an investor purchases a 10% stake in a startup for $100 million, the implied value of the entire company is $1 billion, making it a Unicorn.
It is common for Unicorn companies to be valued highly based on their future growth potential, even if they are not yet profitable or generating massive revenue today.
Common Industries for Unicorns
While Unicorns can emerge from any sector, historically, they are heavily concentrated in industries that allow for rapid scaling (growth).
- FinTech (Financial Technology): Companies digitizing banking, payments, and insurance.
- E-commerce & Marketplace: Platforms connecting buyers and sellers globally.
- Artificial Intelligence & SaaS: Software companies that can sell digital products with low overhead costs.
Conclusion
The “Unicorn” is more than just a buzzword; it is a financial classification that indicates a private company has achieved significant scale and investor confidence. While the term was created to describe rarity, the expanding global economy has seen the “Unicorn Club” grow from a few dozen members to over a thousand worldwide.
Understanding this terminology helps clarity when reading market news, as it distinguishes between established public corporations and high-growth private entities.
Read more – Bootstrapping vs. Venture Capital: Business Funding Models Explained
Frequently Asked Questions (FAQs)
Is a Unicorn company a public stock?
No. By definition, a Unicorn must be a private company. Once a company holds an Initial Public Offering (IPO) and lists on the stock market, it is no longer called a Unicorn, even if it is worth billions.
How many Unicorn companies are there?
The number changes frequently as new startups grow and old ones go public. As of 2025, there are over 1,200 Unicorn companies globally, a massive increase from when the term was coined in 2013.
Can a company lose its Unicorn status?
Yes. If a company’s valuation drops below $1 billion during a new funding round or due to financial struggles, it loses its Unicorn status. This is sometimes called a “down round.”
What is a “Decacorn”?
A Decacorn is a private startup company valued at over $10 billion. It is a higher tier of the Unicorn classification.
Does a $1 billion valuation mean the company has $1 billion in the bank?
No. Valuation is the estimated market value of the company as an asset. It does not mean the company has that amount in cash reserves or revenue. Many Unicorns operate at a loss while growing.