What is a unicorn startup?
You may read that a company "became a unicorn." The word was created by an American investor in 2013 to describe how rare such companies were.
Definition
A unicorn is a startup that is not listed on the stock market and has a valuation of at least $1 billion (roughly Rs 9,000 crore or more at recent exchange rates).
What valuation means
Valuation is the price investors put on the whole company. It is calculated from a new funding round. For example, if an investor pays Rs 100 crore for 10% of a company, the company's value in that deal is Rs 1,000 crore.
What it does not mean
- It does not mean the company is profitable. Many unicorns made losses for years.
- It does not mean the company has that much cash. Valuation is not money in the bank.
- A valuation can fall in later rounds, which is called a "down round."
Related terms
- Decacorn: valued at $10 billion or more.
- Soonicorn: a startup expected to become a unicorn soon.
India
India has many unicorns, mostly in fintech, e-commerce and software. When a unicorn lists on the stock market, the market decides its value every day.
This article is for information and is not investment advice.