This is another fairly new term coined by then-CEO of VimpelCom (now VEON), Alexander Izosimov, who stated in his 2008 Harvard Business Review article that the hyper growth curve is “where the winners get separated from the losers.” Phrased in numbers, hyper growth refers to the point at which the company’s compound annual growth rate (CAGR) reaches 40% or higher. Hyper growth, also known as “blitzscaling,” is the steep part of the S-curve that most young industries experience at some point. Innovations: By utilizing newer technologies, startups are able to speed up production and reach customers faster, which allows the startups to grow and ultimately reach unicorn status.Due to competition between these giants, they generally offer a significant premium which raises the value of the startup. Buyouts: Tech giants like to acquire startups to prevent new competitors, diversify their own offerings, and save resources via already developed tech.As a result, the company’s valuation booms with each round. Fast-growth strategy: These strategies encourage investing large sums of money in each round of financing in order to capture the largest possible market share and prevent major rivals from emerging. While some attribute the existence of unicorns to technological innovations, others claim that unicorns are merely a byproduct of an industry bubble.Įither way, unicorns exist, and there are three main reasons venture capitalists and investors use to justify the high valuations of these startups: When your pitch is examined by prospective investors (which takes less than four minutes on average), this potential is going to be one of the questions they want to be answered. In the case of startups that are the first of their kind in their industry, measuring growth potential becomes even more complicated. As startups, their value is often determined by growth potential rather than actual financial performance. Valuating unicorns is not a straightforward process, however. Giddy-up! (Last horse reference, I promise.)Īileen Lee, founder of CowboyVC, introduced the term in 2013 to describe the rarity of startups with valuations of at least $1 billion.
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