Note: This post has been guest authored by Andy who is a UK native, living and studying in Copenhagen since 2017. Having lived as an expat most of his adult life, Andy has an interest in geopolitics and intercultural communications. He is currently studying a Bachelors degree in Marketing and International Sales and works as a content creator at Valuer.ai, a company connecting resource strong corporates and enterprises with agile startups.
With the trend towards private companies and the reluctance of founders to give in to the temptation of an acquisition, there is a rise in the number of ‘startups’ that have a worth of more than a billion dollars. Of course, this phenomenon requires rapid growth and significant disruption to the market, but it is possible for a select few.
These companies are known as unicorns. Some private companies are so successful that they reach the worth of ten billion dollars, and these are known as decacorns. As of today, there are more than 300 unicorns around the world, with a far smaller number of decacorns and even hectocorns (startups valued over $100 billion) in business.
Companies like Uber, Facebook, SpaceX, Airbnb, Pinterest, and Toutiao are all examples of unicorns. These billion-dollar startup unicorns all have certain things in common that allow startup founders and corporate CEO’s to learn lessons from their success stories:
1. Innovation on a small scale:
Startups are known as hubs for innovation when compared to corporations that typically have a rigid and strict organizational structure. Though there are some successful companies operating with tried-and-tested business models that have worked for decades. These are true exceptions to the constant churning of the market and consumer tastes.
Companies with immense popularity and success are those that are always ready for innovation even if it’s on a small scale. For example, in 2009 when Airbnb was on the verge of bankruptcy, the company noticed something small that completely changed the view of its customers. The company replaced all the amateur photos with professional, high-resolution ones, something Airbnb attributes it’s success to.
Now Airbnb holds significant market share and is more profitable than the traditional travel agencies it disrupted. Attention to and willingness to alter small details within a company’s business model is one of the cornerstones of modern innovation for large corporations, as it is these small details that generate value for consumers, and ultimately, grow market share.
2. Start a mission-driven culture in the company:
Most unicorns have a clear mission statement that is relatable to their target customers. WeWork is a great example of this, the workspace startup has offices in 20 countries across the world and in 20 cities in the United States. If you visit any WeWork office you will find a sign with the words: “Do what you love”.
The mission-driven company culture has proved popular at inspiring consumers on an emotional level, and it is this tailored, targeted emotional communication that influences customers more significantly than other factors. In the case of WeWork (and others), starting with a targeted mission statement means that every action the company takes will be carried out with this in mind. This has allowed the WeWork to grow rapidly and it is currently valued at around $20 billion.
4. Treat your employees well:
A company without its employees is nothing and the sooner one realizes it the better. Ride-sharing unicorn Uber suffered from a lawsuit due to the misclassification of its employees. Uber drivers want to be treated as employees instead of independent contractors, due to the associated benefits. It is in the company’s interest to look out for their employees’ interests, in order to retain top talent. Indeed, not doing so is one of the most common mistakes startups CEO’s make.
Pinterest recently did something unique, allowing its employees to collect equity on better terms. Pinterest employees could keep stocks for seven years without collecting equity on them, and this move proved profitable. These kinds of perks encourage your employees to work harder, as they feel appreciated and valued at work.
5. Design something that customers love:
When people love a product or service, they recommend it to their family and friends. Even a small group of loyal customers that love your product or service can lead your company to success. So, when designing, remember to keep your customer’s preferences in mind. This is known as user experience design (UX) and is proven to improve sales significantly.
When Airbnb was struggling, the CEO was given the advice that it is better to create a product that people love truly, instead of going for one that people only like. The CEO then started working on the principle that it is better to create only a few products that people love instead of many products that people like.
Spending the time to determine what your customers actually want during the design phase will ultimately save you time and money in the long-term. Creating something that has the functionality that fits perfectly with your target customer will produce an offering that customers love and increases brand loyalty.
6. Know when it’s time to take action:
Taking big decisions is imperative to the success of a company. You should always be prepared to pivot in order to adapt to the ever-evolving market and your cut-throat competitors. Atlassian design popular teamwork software such as Confluence and Jiri used by people across the world. Trello (previously Atlassian’s main competitor) designed a popular management tool for teams who wanted better organize assignment of tasks.
However, Atlassian was bold and took quick decision in 2017 to acquire Trello for $425 million before it could grab Atlassian’s market share. This acts as a cautionary tale for startups: big business has an ‘eat or be eaten’ culture. Big decisions need to be made and acted upon at the right time, or the consequences can be dire.
7. It isn’t necessary to be the first to market:
There are many examples of unicorns that have entered a well-established market and succeeded. Only 30% of unicorns were the first to market, many others entered markets with a significant number of competitors.
Timing also plays an important role. If you’re too early no one will understand the importance of your product or service. On the other hand, if you are too late most people will be familiar with those already available.
In terms of innovation, new technology often allows startups to disrupt existing markets. But an innovative technology requires society to catch up to the point where the product is commercially viable, and understanding when this will be is a skill in itself. Within corporations, this is one of the tasks the chief innovation officer (CIO) is responsible for and requires a knowledge of consumer trends and market forecasting.
8. You don’t need to be financially strong:
It is a common misconception that a startup needs substantial liquidity in order to enter the market with stability. Though most Venture Capitalists (VCs) look for financially strong companies for investment. It is estimated that around half of the unicorns currently present in market were not financially stable when starting out.
Investors use many factors to assess the value of a startup, and whilst it would be untrue to say they do not care about finances, there are other factors at play. Highlighting your successes, and showcasing the features of your startup that best represent the growth potential of your startup is much more likely to influence a potential investor.
9. It isn’t necessary to be a consumer-facing company:
To enter the billion-dollar startup club, you shouldn’t always look to become a consumer-facing company. In fact, niche markets can also prove to be a great idea. There are many unicorns that are working for other businesses to help them grow. The names of many unicorns would not be known to the average consumer.
Twilio is a company that operates in the B2B market and facilitates communication between businesses and their customers. Netflix, Uber, and Lyft are using this technology to send automated messages to users. Twilio offers voice and SMS technology to its customers (businesses) to run their operations effectively.
Twilio is a unicorn and is proof that a B2B can also become as successful as any consumer-facing company. The company has a worth of over $2 billion. It designs top-notch products that tech geeks and software engineers idolize.
10. Having a technical CEO doesn’t always make you successful:
There are many firms whose founding CEO was technically minded, and these startups produce highly technical niche products and services. Examples of industries in which this is common are SaaS, mobile apps, and biotech startups. However, it isn’t necessary to have a technical CEO to become a unicorn.
There are many successful startups that have business-minded CEOs, with examples such as Pandora Radio, whose CEO was a musician, and Airbnb, whose CEO was a designer. A CEO with the knowledge of the technology that the company is using or building is, in fact, not enough to lead it to success.
Billion-dollar unicorns are inspirational for any aspiring startup CEO, but they can also offer learning lessons. Learning from their failures as much as their successes are crucial, as it can be easy to fall into the pitfalls common when starting out in business.
Remember these startups may have been in the right place at the right time, their success can be repeated. All it takes to disrupt the market is a good idea and a lot of hard work.