It’s the dream for many tech companies — becoming a unicorn. What does that mean? It means your company has reached a valuation of $1 billion. It’s an incredible achievement and not many startups reach that milestone (currently only 1% globally).
So, what does it take to climb the mountain and what challenges should you expect along the way?
On our 100th episode of B2B Revenue Acceleration, we hosted a live event with a panel of experts whose companies have reached or helped others reach the summit.
Our guests were:
Here’s what they had to say.
When we started, it wasn’t necessarily about being a unicorn as much as it was about building an independent company, and then growing it out.
Dimitri Sirota – CEO of BigID
Don’t Focus on Becoming a Unicorn
In Dimitri’s opinion, becoming a unicorn is not as unique as it used to be, and it really shouldn’t be your overarching goal.
“Clearly, you want to build a business and the business is not predicated on having a horse with a horn,” he says. “It’s founded on having revenue, happy customers that are referenceable, and building demand generation.”
Is it nice for your company to be recognized as a unicorn? Certainly.
But the focus should always be on growing your business and keeping your customers happy.
I think the consensus is that the valuations are insane.
Didi Dayton – Partner at Wing Venture Capital
How are valuations determined?
So the big question is who determines your company’s valuation?
Is it the market? Is it the VCs? Is it large organizations looking to make acquisitions?
“Today, the investors clearly are the ones minting the unicorns,” Dimitri says.
According to him, a lot more public hedge funds and large asset managers are getting involved in funding private startups. They’re coming in at this early stage because it’s a lot cheaper to get a piece of the pie than it is when a company goes public.
So investors take a look at your company and decide if you’re worth something. Then they give you a term sheet with a number on it, and that’s your valuation.
Didi agrees, adding, “I think the consensus is that the valuations are insane.” We’re seeing a large amount of inflation because of these money-chasing deals.
Challenges of Becoming a Unicorn
It’s challenging to build your company up into a unicorn. If it wasn’t, the list of unicorns would be a lot longer.
But what are some of the specific challenges that companies may face along the way?
Thibaut thinks the biggest challenge is hiring. In a high-growth environment, it’s critical to hire the right people and hire them fast. And that can be difficult especially if you run a global company.
Another consideration is looking to hire people with the potential to become future leaders. Why?
Because as your company grows, you will need to slot more and more people into leadership positions. Taking that into consideration early will prevent the headache of trying to force someone into the position who isn’t a good fit later on.
Investing in Operations
You’re not just building a product, you’re building a company.
That’s why Didi believes that you have to invest in operations: “You’re going to need good data later; and workflows and processes at the exit.”
Part of the operations equation involves finding a proper balance between engineering and customer acquisition. Didi says that it’s appropriate in the beginning to place a strong emphasis on engineering. But to reach rapid growth, you will need to pivot and put the full weight of your organization behind customer acquisition at some point.
Timing to Market
Didi also points out that your timing to market needs to be very calculated. It’s not just about assessing a market and entering it. It’s also about understanding your product-market fit for each market and making sure you have the corresponding collateral.
Just because you’re popular in the U.S., it doesn’t mean your product will be popular globally. It’s important that you set the groundwork and have a few global customers that will help you seed that demand.
While we’re on the subject of global thinking, you also have to make sure that you’re pricing your product appropriately for each market and that you have enough ASP (average selling price) to support a global supply chain.
Changing the Habits of the Market
From a marketing perspective, Thomas says one of the biggest challenges is changing the behavior of the consumer. And that comes down to finding the most effective way to push out messaging that demonstrates — simply — the value of the product and shows how it’s relevant to the customer’s life.
Thomas frames the customer conversation like this: “We know we’re asking you to make an effort, but here’s the value you can get.”
The voice of the customer is very powerful in validating you; that’s how you go from risk takers to more conservative customers.
Thomas Been – CMO at Druva
Marketing Priorities for a Fast-Growing Company
Making the right marketing moves is essential to reaching unicorn status. From his perspective as CMO, Thomas believes a fast-growing company should have 3 priorities:
1 – Establishing Awareness
Thomas says first and foremost you should establish awareness. And the best way to do that is to leverage the voice of the customer.
“The voice of the customer is very powerful in validating you,” he says. “That’s how you go from risk takers to more conservative customers and really get your name out there.”
2 – Demand Generation
You also have to figure out how marketing will contribute to revenue. Thomas says that starts with really focusing on figuring out the value you bring to the table.
Have conversations, get your sales engine going, and bring an ecosystem of partners on board that will really help you drive growth. It’s about how you connect marketing to the rest of the company. That focus is critical.
Another critical piece of the puzzle is finding clarity in your message.
“You need to clearly state the value and be consistent about how you talk about your value,” Thomas says. “You can’t afford to be a bit vague.”
That also includes finding consistency in the way you highlight your differences to competitors. This is what helps snowball the demand gen and awareness aspect.
3 – Keep an Eye on Growth
Becoming a unicorn is certainly a milestone, but what are your plans beyond that?
Your goal should be to continue building a solid business and delivering value to customers. To continue that journey, you should always focus on how you plan to continue scaling. How will you continue learning as an organization? How will you identify opportunities to move forward and keep on growing?
Tips for Becoming the Next Unicorn
What tips did our expert panelists have for companies aiming to be the next unicorn?
- Focus on customer care: “Throughout your journey, whether it’s in the initial stages when you’re trying to find product-market fit and you’re developing something, whether it’s later when you’re really trying to not only keep these customers, but grow these customers, I think the importance of customers is paramount. Treat them like kings and queens.” — Dimitri Sirota, CEO of BigID
- Embrace accountability: “Make sure that every person — every single service in the organization — knows they are all accountable for success.” — Thibaut Ceyrolle, EMEA Founder at Snowflake
- Be opportunistic: “If you’re ready when you see value to seize those opportunities, you will keep on creating value.” — Thomas Been, CMO at Druva
Find a suitable path to market: “Ask yourself as a founder, who do you want to be when you grow up? And then determine what the right business model and the right routes to market are because nailing those two things are absolutely critical.” — Didi Dayton, Partner at Wing Venture Capital