Unicorns, startups with a value of over $1 billion, are commonly perceived as the epitome of entrepreneurial success. Just like their elusive mythical counterparts, they stand for something rare and extraordinary, difficult to grasp and even more difficult to obtain. Is there a ‘secret sauce’ to replicate their success?
The typical venture capitalist meets with 1,000 companies a year and funds two of them. What’s more, of every 10,000 businesses that get funding, only one reaches unicorn status. Put another way, the chances of entering the elite circle of mega-successful startups are rather low.
That’s according to Peter S. Cohan, president of the management consulting and venture capital firm Peter S. Cohan & Associates. Peter also points out that entrepreneurs need to have one quality above all else: resourcefulness.
Founders must be able to quickly identify and take advantage of growth opportunities when they arise. Passing the threshold of generating $100 million in revenue is crucial as it allows the startup to move on to the next stage: going public.
Here’s how to get there.
Know your benchmarks
What do Airbnb, Uber and Revolut all have in common? Apart from making enormous profits, they came up with a solution that made the lives of millions of people significantly easier. Roomy apartments instead of overpriced hotel rooms, ride sharing without any hassle, and fee-free currency exchange. These companies clearly hit the zeitgeist.
But how do you know if your idea has unicorn potential? Ask yourself the following:
- Does your idea provide notably greater efficiencies (time and money) over existing solutions?
- Is it beneficial to a large audience of potential users?
- Are you first to market, or are there other existing solutions out there?
- Is there a high barrier to entry that would make it difficult for competitors to displace you?
- Can it easily translate across multiple markets, or are there regulatory, legal or cultural restrictions?
- Do friends, colleagues and acquaintances get excited about your idea?
You’re off to a good start if you can answer all of these questions with ‘yes’, especially the last one. Word of mouth is critical to the virality of idea. Something that you can easily explain the benefits of and that other people are enthusiastic about is a key characteristic of unicorns.
Create a prototype and market strategy
After you’ve done your due diligence in terms of market research, get to grips with building a product prototype. Again, get feedback from a diverse group of people, and lots of it.
You’re looking for the ‘I need this – when is it market-ready?’ kind of reaction. If your product doesn’t create a sense of urgency in the end user, you’re not quite there yet. Step back and give yourself time to work on it until you get the response you’re aiming for.
Once you have a product, think about how you are going to sell it. You should have a business plan in place for how you will grow the business and reach positive revenue. It should be in a realistically short period of time, as until then you’re burning investor cash.
Market your product
Once you know what potential customers think of your product (and ideally, they’re loving it!), make sure people know about it. Spread the news, be it via media placements or social media campaigns. PR programmes that are specifically tailored to your business can help you to attract investors by making sure your business gets traction in relevant publications.
Gaining the attention of potential investors is one thing, getting your message across is another. Many entrepreneurs that have just started out fail, not because their ideas aren’t good but because they don’t know how to communicate them.
You need a strategy that clearly defines your communications objectives and sets realistic milestones. Getting on the radar of investors is the name of the game, so this should be the overarching goal you’re working towards. There’s no such thing as a ‘one size fits it all’ template for becoming the next billion-dollar company, but prospective entrepreneurs can learn a lot from unicorns. The most important lesson might be as simple as this though – dare to dream big.