Have you noticed those unicorns outside your office? Recently, there’s been an uptick in the all-important $1 billion “unicorn” valuation for startups in the tech industry.
By Lax Vekiarides
In the VC-funded startup community, the young companies receiving such valuations are in the media daily.
When an entrepreneur considers her unicorn counterparts, it’s not hard to see why she might start looking for majestic horns at the head of her own business. However, it’s important to remember that the factors that make for a successful startup business do not necessarily include a glitzy price tag. Like the more common (but seriously impressive) racehorse, promising startups can predict their competitiveness based on other factors: pedigree, support from trainers and jockeys, physical strength, and the hunger to run – fast.
Here’s the thing about billion-dollar valuations: they’re heavily based on the success of comparable companies and investors’ desires to make money. Unicorn-like dollar signs can keep other startups out of the company’s space and raise enough eyebrows to keep industry value on the rise. The people responding to these valuations are a major motivating factor behind the lofty assessments in the first place; big numbers, like big horns, impress the right people, but they shouldn’t distract entrepreneurs from valuing the other metrics that are as relevant in today’s landscape as they have always been.