Once upon a time, startups with a billion-dollar valuation were so unique that they were deemed unicorns. However, the unicorn startup landscape has shifted dramatically since the term was coined by VC Aileen Lee in 2013.
Many of today’s unicorn companies are younger, more diverse, and experiencing faster growth than the startups of yesterday. And, they’re multiplying at a staggering rate. As of September 2019, there are over 400 companies classified as unicorns, up from around 300 at the start of the year (source).
Despite their growing numbers, unicorn companies still raise a number of questions among the general public and hopeful entrepreneurs alike. For instance, how do unicorns achieve such massive growth in a short timespan? Is there some sort of “unicorn blueprint” startups can follow to become the next industry giant? Or can startups only achieve this level of success by breaking the mold entirely?
We looked for patterns across high-value startups to find out what unicorns do differently – and how they achieve such unprecedented success – at every stage of their lifecycle.
The Unicorn Blueprint: Building a Billion-Dollar Company Step-by-Step
Step 1: Create a minimum viable product (MVP).
Before establishing themselves as market disruptors or category creators, future unicorns start by creating a minimum viable product (MVP). An MVP with unicorn-potential is a simple, scalable offering that solves a real-world problem. Most importantly, their MVPs are unique. Startups do not become unicorns by simply creating a better vision of something that already exists.
One of the things that sets unicorns apart from typical market leaders is their desire to disrupt. This could mean dramatically improving upon an existing solution or breaking into the market with an entirely new type of product.
It’s important to realize that bigger isn’t always better when it comes to disruptive tech. In other words, specialization and customization are often a better bet than products with immediate mass-appeal.
In fact, the more narrowly you can define your market, the better. Don’t enter a market simply because it’s large — as this can lead to your offering being lost in an overpopulated field. Instead, find your niche, prove your concept with a small user set, and then set your sights on scalable growth.
There are plenty of niche unicorn startups which have proven this point. Even Facebook, which has over 2 billion monthly active users, began by focusing on a narrow segment (American Ivy League students) before scaling.
Step 2: Develop and iterate rapidly.
Unicorn startups tend to move quickly. They operate with a rapid rate of innovation that allows them to experience hyper-growth and receive sky-high valuations.
For example take Brex, a company built by two of the youngest entrepreneurs to achieve unicorn startup status, Henrique Dubugras and Pedro Franceshi. While attending Stanford together, the Brazilian duo founded a VR startup called Beyond. However, a few weeks into the project, they began to notice the massive issues that startups face in gaining access to credit. So, they scrapped their original idea to instead focus on credit solutions for entrepreneurs.
This new startup, Brex, introduced the first corporate card designed for startup founders. It was widely adopted by entrepreneurs and has been wildly successful – in part because their offering was so niche and specialized, and also because they were willing to pivot quickly in response to market demands.
Product development is no easy process, but some of the most successful ideas stem from failure and a willingness to pivot. Experiment, observe, tear everything down, start over, and iterate until your user experience and customer engagement fully align with your business goals.
Step 3: Develop a go-to-market strategy.
The next step in the startup lifecycle is developing an effective go-to-market strategy. A good commercialization strategy should be flexible and responsive – especially in the face of changing market trends and the emergence of new competitors.
In order to develop your value proposition and position your product within the market, you must answer the following questions:
- What are you selling? (Think of this in terms of benefits, rather than features.)
- Who are your ideal customers and what are their needs?
- How will you reach your target market?
- Where and how will you promote your product?
- How will you collect feedback on customer experiences?
It bears repeating: startups with unicorn-level aspirations know the importance of constant iteration. An agile approach allows startups to learn, improve, and launch in ultrafast validation cycles. Break large projects into bite-sized chunks focused on quick deliverables. Act quickly on the feedback you receive, and launch updates as fast as possible to gain positive momentum.
Step 4: Secure financial backing.
Cashflow is the lifeblood of any business. Naturally, young startups often find themselves running on life support. Many seed startups operate on a “revenue first, profitability later” model – but how are they able to access the working capital they need?
There are a few things we can learn from how unicorns navigate this tricky stage. For example, Adi Tatarko, CEO and co-founder of Houzz, notes the importance of “bootstrapping” as it relates to funding. In other words, startups should come to investors with a fully-formed product, rather than a presentation they hope will woo investors into backing a solution that doesn’t exist.
“Go to investors with a real product with traction, instead of a deck,” Tatarko says. “Spend the first couple of months creating a product that people use and love.”
Whether you’re bootstrapping or working against a shortening runway, it’s important to be able to prove traction when the time comes to seek investments. Nail down key sales metrics so you’re able to quantify your growth – which, in turn, can help justify further product development and additional rounds of funding.
Step 5: Invest in promotion and build brand awareness.
Many new startups struggle to find customers due to lack of brand awareness. In some cases, this is linked to the common misconception that “promotion” is synonymous with “marketing”. But there’s an important distinction. While marketing helps build brand awareness, startups must invest in a coordinated initial promotion to give their product a short-term push which can kickstart further growth.
For example, you can leverage content marketing to establish yourself as a trustworthy expert in your industry and provide value to the customer. Even if your brand has little to no reputation, you can build trust and gain traction by striking a balance between informative and entertaining content. Producing new content on a regular basis is a sustainable approach to long-term growth.
But in order to bump up traction in the short-term, successful startups also use promotional techniques across multiple platforms. Given their tight budgets, these startups tend to be craftier than the average company when it comes to SEO, pay-per-click advertising, social media, and other digital channels used to promote their brand and reach a larger audience.
Step 6: Prioritize customer experience to achieve long-term growth and expansion.
In the startup world, if you’re not growing, you’re falling behind. Growth and expansion go hand-in-hand. So, your long-term strategy must include specific tactics to reach a wider audience as you iterate your solutions.
The key to long-term sustainable growth is to start niche, but with the intention and ability to expand. In order to scale up (and evolve your fledgling startup into a true unicorn), you need to attract not only new audiences and prospective investors, but also to retain existing users.
You can’t build a successful company without cultivating, nurturing, and growing a foundation of loyal customers. However, like many aspects of a startup, customer relationships must be built from the ground up. For this reason, startups must prioritize customer experience even more so than the average company. Invest in the necessary tools and hire the right staff so you can prioritize transparent, personalized, and fast customer support and service.
A customer-oriented culture facilitates sustainable growth in many ways, not just through customer retention. Providing a stellar customer experience creates positive word-of-mouth through social media and user-generated reviews. This enables you to garner referrals from satisfied customers. These referrals will drive your company’s growth while also lowering costs associated with customer acquisition.
To Become the Next Unicorn Startup, You Need to Break the Mold
Reaching unicorn status is the pinnacle of startup success – but there’s more than one path to get there. By thinking outside existing boxes that define the industry, upcoming tech startups have the potential to become disruptors, category creators, and market leaders.
Sure, there’s no one blueprint you can follow. But, you can learn plenty by studying successful startups and analyzing the characteristics that set them apart from their competitors. Apply these lessons to your own business – and then be willing to break the mold in your own way.
Learn more about ZoomInfo by contacting our sales team today. We’re more than just a B2B contact database. We have the tools you need to simplify and increase the effectiveness of your go-to-market strategy.
Emily Bauer is a writer and researcher for Propeller CRM, a simple Gmail CRM solution focused on building pipelines, closing sales, and growing business. Emily is a running and travel enthusiast with a passion for all things writing. Her passions are fueled by Earl Grey, yoga, and tofu.