How Unicorns Grow

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How Unicorns Grow

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Publication Date:
January 01, 2016

Start-ups seem to be getting bigger faster than ever–Uber is just one example of today’s “unicorns,” or private, venture-backed companies valued at a billion dollars or more. But is that really true, and does rapid growth lead to greater long-term success? Researchers at the Silicon Valley consultancy Play Bigger examined these questions and came up with some intriguing findings. Among them: Today’s start-ups are growing about twice as fast as those founded a decade ago (as measured by market capitalization). However, there’s no relationship between amount raised prior to IPO and growth in market cap afterwards. Age at IPO does seem to be predictive–companies that go public between the ages of six and 10 years generate 95% of all value created post-IPO. And most value creation comes from “category kings”– companies, such as Facebook and LinkedIn, that carve out entirely new, winner-take-all niches. Tech start-ups are in a race to define new product categories, and in recent years the pace has quickened. Simply raising more money isn’t enough to win the race–and going public too early or too late may limit success. Even for unicorns, the path forward is challenging.

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How Unicorns Grow

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