Unicorn: Definition, Characteristics, Valuation Value and Examples

Unicorn is a term for a startup company with a nominal value of assets reaching USD 1 billion. This term is widely discussed in various business news, but many people do not understand the meaning, examples and criteria for companies that are classified as unicorns.

Even though it is still in the form of a start-up, a unicorn company is a business entity that allows it to continue to grow and employ many employees. Therefore, to understand it better, let's see the explanation below!

What Are Unicorns?

A unicorn company is a business entity, specifically in the form of a PT, with a nominal value of US$1 billion or around Rp14 trillion. In general, this term is used by start-up companies in the field of online information and technology, such as application development, payment services, or transportation.

The first mention of the unicorn refers to the myth of a rare mythological animal, namely the unicorn horse. These animals are the same as startups that have managed to reach a valuation of up to US$ 1 billion which is very high considering that they are still in the development stage.

Valuation is the financial value of the company which later when a party wants to buy it must pay for that value. So, a unicorn startup is a business entity with tremendous value.

Unicorn Business Characteristics

Unicorn companies usually have several characteristics. The characteristics of a unicorn company are as follows.

• There is innovation

The main characteristic that is usually found in unicorn companies is business innovation. Feet saw this on Gojek. At first, we did not know about motorcycle taxi services, pick-up services, or online orders. However, thanks to the birth of these startups, large companies emerged in the transportation industry.

• Focus on customer service

In general, the services offered by unicorn companies are B2C (business to consumer), which is a business strategy that focuses on a wide price range of customers. An example is Spotify, which is developing a free and legal music service within the program.

• Technical development

The hallmark of almost all unicorn startups is the development of technology that allows you to use multiple modes in one application. The example is Gojek which offers online motorcycle taxi services, food ordering, goods delivery and various payments.

• Private ownership

One of the reasons why the company has grown rapidly to reach the title of unicorn is because of its private ownership. As a result, companies become more sensitive and make investment decisions more quickly, thereby increasing valuations.

Unicorn Valuation Value

Startup companies themselves are judged based on their value. This score is used as a reference to measure the company's business potential.

If a startup is worth IDR 1 trillion, someone who wants to buy it must pay up to IDR 1 trillion. The more funding a startup receives, the higher its rating number. A high valuation is considered very promising and can certainly attract many investors. At the same time, the valuation of unicorn companies is usually based on how investors and venture capitalists view startup growth and development. In the long term of course.

This rating has nothing to do with the startup's financial situation. Because of this, many startups rarely make a profit the first time.

However, investors and capitalists may face some obstacles. If there are no other competitors in the industry, perhaps no other business model can compete, so the process is a bit complicated.

Unicorn Company Example

In Indonesia, Traveloka, Bukalapak, and OVO are examples of startups that have reached the unicorn rank. Recently, a food and beverage company, Kopi Kenangan, was included in the list of unicorn startups after receiving an injection of IDR 1,3 trillion.

Series C funding was led by Tybourne Capital Management and supported by several investors from the previous series including Horizons Ventures, Kunlun and B Capital, as well as a new investor, namely Falcon Edge Capital. This funding has now valued the Kopi Kenangan company at $1 billion.

According to CB Insights' Unicorn Tracker, there are at least 907 unicorn companies worldwide as of November 2021. The total value of unicorn startups is $2,995 billion.

The higher unicorns are the decahorn and hetohorn. Decacorn is a startup with a valuation of US$10 billion or Rp.140 billion. Hectocorn is a startup with a valuation of $100 billion or IDR 1.400 trillion. Hectocorn Level is the company's highest rating level. Tech companies like Apple, Google, Microsoft, Facebook, Oracle, and Cisco are rated at the Hectocorn level.

Usually there are only one to three new companies per year that can reach this level. Of course, only world-class companies can be at this level.

Thus the explanation about the unicorn that we can explain. May be useful!