Exploring Unicorn Companies: The Next Business Legend?

“Unicorn companies” have become a focal point in the entrepreneurial and investment world in recent years. These companies achieve rapid growth in a short period of time and even reshape market landscapes through innovative technologies and unique business models. 

Global tech giants like Google, Facebook, Uber, and even Taiwan’s recent Gogoro and Appier were all once part of the unicorn company club. But what exactly are unicorn companies and how do they rise? This article will give you an in-depth understanding of their definition, characteristics, and keys to success.

Mastering the growth models and market strategies of unicorn companies helps start-ups enhance their competitiveness and accelerate development. In that vein, JustCo Taiwan provides flexible office solutions to help companies build a professional image and lay the foundation for the next business legend.

What Is a Unicorn Company?

The meaning of a ‘unicorn’ in the context of business refers to a technology start-up that has been established for less than ten years but has a valuation of more than US$1 billion and has not yet gone public. 

The term was coined by venture capital expert Aileen Lee in 2013 to symbolise the rarity and high potential of such companies. Every year, global data agency, CB Insights, publishes the latest list of unicorn companies. If a company goes public or its business declines, it will be removed from the list. 

With market and technology changes, the number of unicorn companies has been rising year by year, becoming the focus of attention in the global entrepreneurial circle.

What Are Some World-Famous Unicorn Enterprises? 

Although the concept of unicorn enterprises was not formally proposed until 2013, some technology companies that met this standard had already appeared decades ago.

For example, Intel in the 1960s, Apple, Oracle, and Microsoft in the 1970s, and Cisco in the 1980s all rose to prominence in their respective eras through technological innovation and became global market leaders. By the 1990s, Google and Amazon further disrupted the search engine and e-commerce industries, continuing to lead technological change.

Entering the 2010s, the number of unicorn companies began to increase rapidly, with Uber becoming the unicorn with the highest valuation in 2019. In addition, the successful ‘graduation’ upon listing for companies that were once unicorns, such as Facebook, Twitter, LinkedIn, Instagram, and YouTube, further consolidated their market position. 

Today, new companies join the unicorn club every year, continuously driving the evolution of global technology and business models.

What Are Taiwan’s Unicorn Companies?

Although Taiwan is famous for its manufacturing industry, its start-up sector has developed rapidly in recent years, with companies that meet unicorn standards gradually emerging. 

Additionally, the National Development Council launched the “Entrepreneurship Angel Investment Programme” in 2018 to support new start-ups through the National Development Fund. In 2019, it announced that Gogoro (Rui Neng) and Appier (Pei Xing Interactive Technology) had reached the threshold of unicorn companies, becoming Taiwan’s representative new start-ups. 

The success of these companies not only demonstrates Taiwan’s competitiveness in the fields of electric locomotives and AI technology, but also provides a model for the development of more start-ups.

Common characteristics of unicorn companies

Unicorn companies can rise rapidly in a short period of time due to several common characteristics. These companies have the potential for rapid growth, can disrupt the market through innovative technologies and business models, and create far-reaching products or services. 

Here are a few key characteristics of unicorns:

• High growth rate: These companies usually achieve astonishing revenue and user growth in a short period of time, quickly establishing themselves as industry leaders through market expansion, financing, and technological breakthroughs.
• Innovative technology or business model: Unicorn companies are good at subverting traditional industries, redefining market rules and enhancing competitive advantages through technological innovation or unique business models.
• Disruptive products or services: Their offerings often solve pain points in the market, provide unprecedented solutions, and successfully attract a large number of consumers and corporate customers.
• Strong market potential: These companies usually target high-growth industries and have a huge market size and room for development, fuelling investor and market expectations for their future value. 

Taiwan’s Unicorns: Opportunities and Challenges

In recent years, Taiwan’s start-ups have demonstrated strong innovation and growth potential, gradually emerging in the international market. However, the process of becoming a start-up unicorn is not easy. 

Taiwan’s entrepreneurial environment still faces many challenges that affect development speed and international competitiveness, such as:

• Difficulty in obtaining funding: Compared with other international entrepreneurial hotspots, it is more difficult for start-ups to raise early-stage funds in Taiwan. Investors here generally prefer mature industries, making it difficult for companies to obtain sufficient financial support to promote growth.
• Serious brain drain: Taiwan has high-quality science, technology, and business talents, but many choose to work overseas due to better salaries and development opportunities offered by international companies. This puts local companies at a disadvantage.
• Limited market size: Taiwan’s market is relatively small so unicorn companies must expand internationally to continue to grow. However, faced with limited resources and a fiercely competitive global environment, it’s a challenge to enter overseas markets quickly.
• Regulatory restrictions: Some regulations have not fully kept up with the development needs of the start-up industry, which may affect fundraising, mergers and acquisitions, and corporate expansion plans. This makes it difficult for start-ups to adjust their business strategies for development.

Although unicorn companies in Taiwan face many difficulties in development, the government and private institutions have begun to actively invest funds and resources to optimise the entrepreneurial environment. These initiatives can give start-ups a better chance to shine in the international market.

Business Model of Unicorn Companies

Besides technological innovation, choosing the right business model and growth strategies is crucial for the rapid rise of unicorn enterprises. Here are common business models:

• Platform economy: Connecting supply and demand through digital platforms, such as e-commerce websites and delivery platforms, to provide an efficient trading environment and create economies of scale.
• Subscription model: Providing services for a recurring fee, such as streaming video and cloud software, ensuring stable revenue streams and user loyalty.
• Sharing economy: Emphasises resource sharing, such as shared office spaces and shared transportation, to reduce costs and improve utilisation efficiency.

Unicorns have been able to achieve rapid growth in a short period of time and become industry leaders through the following growth strategies:

• Rapid expansion: Quickly entering markets through capital investment, increasing market share, and seizing opportunities.
• Technological innovation: Continuously developing new technologies and solutions to ensure that products or services have competitive advantages.
• Market expansion: Actively exploring new markets, finding potential business opportunities, and adapting to the needs of different regions to expand brand influence.

Frequently Asked Questions

How is the valuation of a unicorn company calculated?

The valuation of a unicorn company primarily comes from evaluations by investment institutions, considering factors such as market potential, technological innovation, user growth rate, and business model. 

Since these companies are not yet publicly listed, the valuation usually comes from private investments, such as venture capital or private equity funds. Investors measure their value based on future growth potential. 

What are the differences between unicorn companies and regular start-ups?

The biggest difference between unicorn companies and regular start-ups lies in the valuation scale and growth speed. Unicorn companies need to reach a valuation of $1 billion within 10 years and not yet be publicly listed. They usually possess disruptive innovation and the ability to expand into the global market. 

Meanwhile, regular start-ups are still in the early stages of development, have limited funding sources, relatively smaller market impact, and a more stable growth model.

What are the risks of investing in unicorn companies?

While investing in unicorn companies has high potential returns, the risks cannot be ignored. These include market changes, competitor impacts, uncertain profit models, and potentially overvalued investments that lead to investment bubbles. Furthermore, as these companies are not yet publicly listed, investors’ capital liquidity is low and the payback period is long, so careful evaluation is required.