How to become a unicorn startup in 2024

Unicorn startups are highly respected in the business world, and rightfully so. To become a unicorn startup, a company needs to reach an investor valuation of $1 billion or more, and as of 2024, there are only around 1,200 unicorns worldwide. Very few startups reach this kind of success as there are many hurdles to jump through in order to turn a company into a multi-billion dollar enterprise.

While it’s not impossible, attaining unicorn status can be incredibly difficult. After all, 90% of startups eventually fail, and the odds of becoming a unicorn are far worse (0.00006% chance to be exact). And for those companies that do become unicorns, it takes an average of six years.

That said, there are startups that beat the odds. How do they do it? 

In this unicorn startup checklist, we’ll break down everything you need to know on how to become a unicorn. We will discuss some common characteristics and strategies of successful unicorns so that you can follow in their footsteps. Ready to understand the formula for creating a successful startup? Let’s dive in.

What is a unicorn startup?

Before we start getting into the nitty-gritty of how to drive your startup toward unicorn status, let’s pump the brakes to explain what exactly a “unicorn startup” is.

Simply put, a unicorn startup is a privately held company that is worth more than $1 billion. The term was coined by venture capitalist Aileen Lee in 2013 to highlight the almost mythical rarity of such companies in the startup ecosystem. These companies, while still a rarity, are becoming more and more common. In 2014, there were only 80 unicorns in the world, a number which has increased by more than 1,500% in the last decade.

Some of the most successful unicorn startups of all time are:

• ByteDance (TikTok’s parent company)
• SpaceX
• Uber (was valued at $80 billion during its initial public offering in 2019)
• Airbnb (was valued at $86.5 billion during its initial public offering in 2020)

How to become a unicorn startup: 6 steps towards success

While this unicorn startup checklist doesn’t guarantee that you’ll become a unicorn, it’ll help you better understand the processes and business strategies that startups utilize to succeed in their markets.

Follow these steps to build a product, find a business model to generate profit, attract investors, and eventually scale up.

1. Develop a minimum viable product (MVP)
2. Craft an effective business model
3. Secure seed funding
4. Pitch investors
5. Scale your business
6. Plan your exit strategy

1. Planning stage: Develop a minimum viable product (MVP)

Every unicorn company starts with a “billion-dollar idea.” While having a good idea isn’t necessarily enough to become a unicorn, it’s the first step in the difficult process. After all, your startup won’t gain much traction or secure VC funding if there isn’t a market for your product.

During this stage, you should create a solid business plan, visualize what your product will look like, and determine who your customer base is. It is crucial to have a clear picture and road map for your startup, as this will make the process of securing VC funding much easier.

Here are some important questions things to keep in mind during the planning or “pre-seed” stage of becoming a unicorn startup:

• Identify a user problem and propose a solution
• Determine a “large, homogenous” potential target market and customer base
• Create a product that’s accessible, user-friendly, and cost-effective
• Develop an MVP using minimal resources (only include the absolutely essential features)
• Test the MVP with users to get feedback
• Make changes to the MVP based on feedback
• Calculate the costs to build the improved (final) product
• Build and launch your final product

2. Craft an effective business model

This step also falls into the pre-seed stage in the startup lifecycle. Once you have an idea and have created a minimum viable product, you’ll need to organize yourself to ensure that your business is set up for the rapid exponential growth of a unicorn startup. While your operation may be small at this stage, you should plan for the future and create a roadmap that includes every step of the journey to $1 billion. 

In this step, you’ll need to answer questions like:

How will you market the product?

In the modern startup world, marketing is almost as important as the idea (if not more so). You can have an amazing vision for your product and provide a great solution to common problems, but without effective marketing, your startup simply won’t have the necessary reach to make it big. This is why it is important to determine your best marketing channels and strategize how you will use them to spread the word about your company.

How much will your product cost?

You’ll need to strategically price your product/service, as this seemingly small detail can make or break the trajectory of your startup. Price your product based on the following:

• The real value that it provides users
• Competitor prices
• Target market demographics

If your product costs more than it is worth, no one is going to want to buy it. Conversely, if it is priced too low, customers may avoid it, fearing that it is low quality.

What will your sales channels be?

Your startup’s sales channels are various places, both physical and virtual, where customers can purchase your product or services. These can include brick-and-mortar stores, online marketplaces, and affiliate partnerships, just to name a few. To pave the way for becoming a unicorn, you should have a clear idea of where you will sell your product before you start scaling.

How do you plan to roll out your product effectively?

While crafting your business model, you should test your MVP and receive feedback from users to make sure it solves their problems. Gather feedback from early users to ensure your product addresses their pain points. This allows you to make necessary tweaks before receiving funding and officially rolling out your product. 

You’ll also want to develop a compelling value proposition that clearly differentiates your product from competitors. Then, execute a local or small-scale rollout to validate your business model in real-world conditions, identifying strengths and areas for improvement.

Don’t rush things when rolling out your product. Focus on delivering exceptional customer experiences early on, as satisfied customers can become your best advocates.

Reviews and testimonials are priceless in the early stages of a startup. They serve as tangible social proof and build trust among your customer base. 

3. Secure your initial seed funding

Now that you have created and tested your MVP and properly planned for massive growth, your startup is ready to receive seed funding. This is the first injection of capital your startup will receive. While the amount of investment you get will be far less than in future funding rounds, seed funding can have a major impact on your chances of becoming a unicorn startup. 

Seed funding will provide your startup with the funds it needs to put your business model into practice and officially release your product to the market. Venture capital firms generally won’t show much interest in a startup until after the seed funding stage.

Here are some common ways that your startup can secure initial seed funding:

Crowdfunding

This involves raising money from a large group of people, often through online platforms like Kickstarter or Indiegogo. Generally, each investment will be relatively small, but due to the larger size of the crowd, you can raise quite a big chunk of money with crowdfunding when done correctly. Crowdfunding also helps to validate your product by building a community of early adopters who believe in your idea. 

Some examples of unicorn startups that got their start through crowdfunding campaigns are:

• Oculus VR
• AllBirds
• Peloton

Friends and family

One of the most low-risk ways to raise funds for your startup is to turn to people close to you. This is a good starting point as they are more likely to believe in your vision and provide flexible terms. That said, tread carefully here. It is essential to treat this professionally to avoid damaging personal relationships.

Investing your own funds

Most unicorn startup founders get at least a sizable portion of their seed funding from their own personal savings. While there is obviously more risk involved with this, it can show potential future investors that you are confident in your idea and have “skin in the game.” It also gives you full control over the business early on, which can be an important factor in realizing your vision.

Obtaining a loan

Small business loans or personal loans can be a reliable option for initial seed funding, especially if you have good credit or assets. While loans come with the obligation to repay with interest, they don’t require giving up equity in your startup.

4. Pitch major investors: Series A funding

Arguably, the most important step in becoming a unicorn startup is having a plan in place to secure major investments through VC funding. No matter how good of an idea you have, your product won’t get off the ground without the necessary funds. And when it comes to becoming a unicorn startup, you better believe you will need some serious capital.

Series A funding is generally the first of several investment rounds a unicorn startup will receive. During a Series A funding round, venture capitalists will give your startup cash in exchange for shares of the company. This is the first point at which your ownership in the startup will start to “dilute” as you sell pieces of the company. More than 80% of startups fail due to cash flow problems, so it is beyond important to have a strong pitch and be proactive about getting investors on board.

How much Series A funding do unicorns receive?

The median Series A funding amount for startups in 2024 was $18 million, but unicorns are an entirely different breed. On average, unicorns have received much more Series A funding, but this isn’t always the case. In fact, some did not gain major traction until later rounds. 

• Facebook: Raised $12.7 million in Series A funding  in 2005
• Airbnb: Raised $7.2 million in Series A funding in 2010
• Tesla: Raised $7.5 million in Series A funding in 2004
• Canva: Raised $15 million in Series A funding in 2015

So, how do you raise Series A funding?

Craft a pitch deck: Your pitch deck is the cornerstone of your presentation to investors. It should clearly communicate your vision, potential for growth, and why investing in your startup is a good bet. Your pitch deck should break down what sets your startup apart and your plan and vision for becoming a unicorn.

Choose VC firms wisely: You shouldn’t expect every VC firm you come across to be ready to invest in your startup. Target investors that have previously funded companies in your industry or stage of growth. 

Tell potential investors how much funding you need: You should present investors with a thorough and clear financial plan that explains how much money your startup needs and what you will do with the funds to expand and scale the business.

Negotiate terms: Before finalizing the contract, make sure that the deal aligns with your long-term vision and allows you to retain enough control to steer the company toward unicorn status.

5. Scale your startup

Series A funding is just the beginning for most unicorns. In fact, some unicorn startups will go through 4 or 5 funding rounds before an initial public offering (IPO). Your startup will grow exponentially during the scaling phase as you receive more funding and push the company further.

Only around 30% of seed startups make it to Series A funding, and only 65% of those Series A startups will receive Series B funding. So, making it to the growth stage alone is a major success. It goes without saying that the growth stage is tough. But, with the right growth strategy, funding, and organization, your startup can succeed in scaling and be on its way to becoming a unicorn.

In order to become a billion-dollar startup, you will focus on accelerating growth, reaching new markets, improving and streamlining processes, and building a solid team of staff.  

Of course, to do all of this, you’ll also need more investment, which is where Series B and C funding comes in. As your company grows and matures, you’ll attract more VC investment, which will only help you expand your operations, inching closer and closer to unicorn status.

6. Plan for your exit strategy

As your startup grows closer to unicorn status, you’ll need to formulate an exit strategy. High-growth startups typically have two main exit options: going public or acquisition.

IPO: Taking your company public allows you to sell shares on the stock market, raising significant capital while giving early investors and founders a chance to cash out. This is often seen as the ultimate end goal for unicorn startups.

Acquisition: Many unicorns are also acquired by larger companies that see value in their technology, customer base, or market position. An acquisition can provide a quick, profitable exit for founders and early investors while the startup becomes integrated into a larger organization. For example, Facebook acquired Instagram in 2012 for $1 billion, and Google purchased YouTube in 2006 for $1.65 billion.

Traits of a unicorn startup: How do they differ from normal businesses?

While thousands of new businesses pop up every year, most startups fail, and only a small percentage of the startups that succeed can become full-fledged unicorns. To improve those odds for your startup, let’s look at what characteristics these unicorns have in common and how you can emulate them.

1. Unicorns are disruptive

In business, disruption is a good thing, especially for aspiring unicorns. Disruption refers to innovation in an industry that radically affects the way that the industry or market operates. Disruptors usually start out at the bottom of the market by providing simpler, cheaper solutions that meet the same needs as higher-end products.

These products become increasingly appealing to consumers due to their affordability, and the business gradually moves up the market, maybe even taking it over. A notable example is streaming giant Netflix, which disrupted the video and TV industry by launching its budget-friendly DVD-rental subscriptions and, eventually, video streaming services in 2007.

Disruption requires startups to come up with new, creative solutions that might differ from the conventional. To do so, experiment with different business models — such as freemium, subscriptions, or commissions — until you find one that works for you. Think outside the box and seek to innovate, but also remain agile so you can pivot at any given time.

2. Unicorns are tech-savvy

Growing companies take advantage of technologies and software available to help the business scale. Whether it’s through cloud computing, Customer Relationship Management (CRM) systems, or business software, leveraging technology allows companies to run more efficiently with fewer resources.

Advancements in AI make it one of the most versatile tools that businesses can take advantage of. AI can be used to automate processes, provide customized user experiences, improve customer service, and more. OpenAI is a prime example of a company that capitalized on emerging tech, which is rising rapidly, and has become one of the most valuable startups in the world after the release of ChatGPT in 2022.

To go beyond just using technology, you could also base your product or business on technology, as the majority of unicorns do. In fact, nearly a third of all unicorns are tech companies.

3. Unicorns are consumer-focused

As of 2023, a whopping 62% of unicorns have a B2C (business-to-consumer) system, which means their business model revolves around providing affordable products and services to everyday consumers. To create products that consumers actually want, you have to identify ways to improve the lives of a specific target audience. Additionally, products also have to incorporate intuitive user experience (UX) design so that it’s easy for consumers to use and understand.

Unicorns offer a strong value proposition or a promise of how and why the product will bring value to customers. Having a strong value proposition will improve both your sales and marketing efforts.

As technology becomes more integrated with business operations, these useful tools can help elevate your startup.

4. Unicorns are efficient

The concept of building MVPs comes from a business approach that’s known as the Lean Startup, in which startups can maximize efficiency by repeatedly testing and adjusting their MVPs based on user feedback.

Since MVPs are only equipped with the “must-have” features, they are more cost-effective to build and allow you to pivot without sacrificing a fully made product.

One example of a successful MVP was Uber, an idea borne out of the founders’ struggles to hail a cab on a wintery night in Paris. They initially tested their MVP with only three cars and a simple interface, collecting user feedback after each ride to make improvements. After adding new features over the years, Uber has grown to be a world-renowned and undoubtedly disruptive company.

Like Uber’s early MVP, your MVP doesn’t have to be fully complete. It’s meant to gauge whether users are interested in the product at all, so if there’s no interest, you can scrap it and pivot to another idea.

5. Unicorns are growth-driven

The authors of the startup book Exponential Organizations found that unicorns employ strategies that allow them to scale at exponential rates; thus, they’re dubbed “exponential organizations.”

The unicorns analyzed in the book selected a Massive Transformative Purpose (MTP) for their business, like Google’s “Organize the World’s Information.” An MTP is a highly ambitious goal that drives the team and encourages them to think outside the box to reach said goal. With a clear vision in mind, these unicorn companies achieved growth by validating their marketing and sales channels with local testing and then quickly replicating the successful strategies in other locations.

To scale your company like a unicorn, you should establish clear growth goals and identify a vision for your company — or perhaps an MTP. Create a plan to scale by identifying promising sales channels and using key performance indicators to keep you on track.

Examples: Growth lessons from real-life unicorns

Growth doesn’t happen overnight. Even the fastest-growing startups may need to go through multiple rounds of funding to achieve unicorn status. Follow in the footsteps of recent unicorn startups by applying their tips for growing and running a company.

Hire the right people – Guild Education

To build a successful startup, you need strong team members who will help drive growth. It’s important to hire people with not only the skill sets you need but also the same values. If everyone is on the same page about where they want the company to go, you’ll be able to collaborate more cohesively to reach those goals.

This approach applies to hiring team members as well as members of the board. Rachel Romer (formally Carlson), co-founder and CEO of education technology (EdTech) company Guild Education, said having a board is essential in helping identify business risks and potential areas of growth.

She suggested changing the board member roster as your company scales to create a board that will help meet the company’s new needs.

“A shared value system and a level of trust [are] really important because it’s easy to get sideways,” she said.

Solve real, existing problems – Canva

Products that address customers’ needs or wants will naturally gain users. That’s why it’s important to identify a problem that your business aims to solve from day one. Online infographic creation platform Canva did just that and earned unicorn status in 2020.

“If your startup solves a problem, when you launch, you’ll have an audience that cares about your company. And then they will tell other people because they care about that problem, too,” said founder and CEO Melanie Perkins.

Problems can be inspired by personal experiences or common issues faced by the general population. After solving the initial problem, continue improving your product by adding features that users want and ask for.

Know your stuff – Airwallex

Investors play a huge role in funding your startup, so it’s important to get them on board with your business.

Fundraising can be a long, arduous process, but the key to success is to have confidence in yourself and your business, said Lucy Liu, CEO of Airwallex, a cross-border payment platform. The company became a unicorn in 2019, and it has since reached a valuation of $5.6 billion.

When it comes to fundraising, Liu said that you need to demonstrate to investors that you know your business and your competitors inside and out. “Otherwise, why would they trust you with their money, and why would they support you?”

Because investments are business relationships and not loans or donations, you’ll have to convince VCs that your company is worth backing, Liu added.

“To appeal to investors, you have to think like an investor,” she said.

Manage costs effectively – Quizlet

To become a unicorn, you may have to start instead of thinking like a camel. While certainly less glamorous, these animals represent adaptability, perseverance, and resilience as they’re able to survive for long periods in the harshest desert environments.

Having this mindset is especially useful during times of business uncertainty — such as recessions, pandemics, or other industry disruptions — as it allows you to get through the crisis and sustain growth during unpredictable conditions.

This requires financial planning and effective cost management throughout the business life cycle to aim for a long-term growth curve. Reduce your burn rate by cutting unnecessary costs and invest in the most important things — your product and your team.

“You want to have a business that can survive the ups and the downs,” said Matt Glotzbach, CEO of Quizlet. The company, which offers online study platforms, became a unicorn during the pandemic.

Cultivate relationships – Calendly

Building relationships is a crucial part of running a successful business. Having a network of contacts allows you to more easily find suitable business partners, prospective clients, or potential investors.

Establishing a strong rapport with established business leaders can be especially beneficial for newer companies, since they can provide valuable business insights and teach you business skills that are otherwise learned through trial and error.

“It takes a village. Find a founder or CEO peer network,” said Babatope Awotona, CEO of Calendly. The software company raised a valuation of $3 billion in early 2021.

Awotona also suggested this: “Aim to strike a balance between peers that are currently at the same stage and those that are a few years ahead of where you’d like to be.”

Build a solid foundation – Razorpay

While ambition can drive growth, if you go too fast, you could end up crashing and burning.

Follow CEO Harshil Mathur’s approach by focusing on sustainable growth instead. His payment gateway company Razorpay, which joined the unicorn club in 2020, initially concentrated on creating payment solutions for the target market rather than chasing transaction volumes or big valuations.

Big clients take a lot of time and effort to acquire, and even if you do, “your entire bandwidth would go into serving this one large customer,” said Mathur. He advised that startups should focus on smaller clients when starting out and shift focus to bigger clients once your company has the infrastructure and capital to do so.

“The idea is to prove a scalable business model first, and grow from there,” said Mathur.

There isn’t an exact recipe to build a unicorn startup, but following the tips and strategies of existing unicorns can help take your business to the next level. Once you develop a simple, affordable solution to address users’ problems and scale up, you’ll be one step closer to reaching unicorn standards.