Unicorn

The term was coined by venture capitalist Aileen Lee in 2013, when such companies were rare, like the mythical creature. Since then, the number of unicorns has grown into the hundreds, driven by abundant venture capital and fast-growing technology businesses.

Unicorn valuations are usually based on the price paid in a company’s latest funding round. For example, if investors pay for a 10% stake in a start-up at a price implying a total value of 1.2 billion, the company becomes a unicorn.

Related terms include decacorn, for private companies valued at 10 billion dollars or more.

Headline unicorn valuations can be misleading. Later-stage investors often receive special rights, such as liquidation preferences, that make their shares more valuable than ordinary shares, so the headline figure may overstate the company’s true value. Many unicorns saw their valuations cut after 2021, when rising interest rates reduced appetite for high-growth, loss-making companies. Some later listed successfully, while others were sold for less or failed.