Decoded: What are unicorns, decacorns and hectocorns?
We hear the term unicorn so very often for startups that are doing well. So what are unicorns in the startup universe? Can only startups become unicorns? Let's understand all these
Anurag Sharma New Delhi
From being a mythical creature to a regular feature in business and financial discussions, unicorns certainly have come a long way. Do you know even the likes of McDonald’s and Ford Motors began as startups?
In its latest outlook on the ‘State of the Economy’, the Reserve Bank said that the year 2021 could turn out to be India’s year of IPOs, with the domestic unicorns setting "domestic stock markets on fire and global investors in a frenzy" through their public issues.
RBI on unicorn boom: "A new era has clearly begun. Unicorns do not rely on inherited wealth or depend on bank loans or extra-business connections, but on talent and innovative ideas. These are the children of liberalisation, not of the wealthy"
It is something great to hear, isn't it?
But do you know what it means to be a unicorn?
Well, in venture capital, the word refers to any startup that had reached the valuation of $1 billion.? Aileen Lee, founder, Cowboy ventures
It was Aileen Lee, founder of Cowboy ventures who for the very first time used this word in 2013 to emphasise the rarity of such startups. Since then, business leaders and publications have use this term quite liberally to write on or discuss startups.
To be a unicorn, however, is no cakewalk.
The term is associated with some companies that have changed the rules of the game with their innovative solutions and concepts and, of course, business models. To name a few, just think of Uber, which changed the way people travelled. Or Paytm, which made the life of a common man easier with bill payments and bookings on their fingertips. Airbnb changed the way people planned their stay while travelling. So, the key features of a unicorn is their novelty in the proposal and the potential to disrupt the market, besides their being high on tech.
The common question that people ask is - can only a startup be a unicorn?
Yes. The term is for startups that have a valuation of over 1 billion dollars. And startups that exceed the valuation of $10 billion are called decacorns. The entities with over $100 billion valuation are hectocorns.
So, currently how many unicorns does India have?
The RBI in its August 2021 bulletin said “it is estimated that India has 100 unicorns, with 10 new ones created in 2019 and 13 in 2020, in spite of the pandemic, and 3 per month in 2021 so far". According to US-based analytics platform CB Insights’ database, however, out of a total of 642 unicorns around the world, India had 29 as of April 2021. The variation in number may be on account of how a start-up is counted as a unicorn and at what point it is phased out of the list.
Now, is being a unicorn an achievement?
It is surely a marker for a company in its growth story, but one can argue whether it’s a major achievement or not. The reason is that there’s nothing real about a start-up valuation.
It’s a notional value, depending on the cash flow availability, ambition and assessment of the key investors funding and backing a startup. Since this valuation has nothing to do with revenues, profits or any other benchmarks used in any traditional business, it’s something of a sentiment-driven play by investors.
So, it is not necessary that every unicorn will end up being a super-successful startup.
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Topics :Startupsunicorn companies
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First Published: Oct 06 2021 | 12:50 PM IST