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Unicorns exist. Unicorn companies, that is. In fact, there are now 554 of them in the world.
Source: shutterstock.com/LuckyStep
We’re not talking about one-horned horses… no, these are private companies, called “unicorns,” that have reached a $1 billion valuation. Unicorn companies are rare – CBInsights estimates that any given private company has a 0.00006% chance of reaching a $1 billion+ valuation… and it takes an average of seven years to crack that $1 billion mark if it does happen.
Very few private investors are lucky enough to invest on the ground floor of the next SpaceX, Instacart, or Chime. But there are a few strategies that can help increase the odds of finding that billion-dollar diamond in the rough.
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A Unicorn Company Looks for Tech… and Weeds Out Competition
Unicorn companies use technology to succeed – most even incorporate it into their products and services. Nearly 90% of successful private companies produce software. Just 7% produce hardware, and the rest focus on goods and services. Obviously, the future is digital, but with all those software companies, there’s bound to be competition.
In fact, of the 10 most recent unicorns, four focus on fintech. But as venture capital investing expert Cody Shirk has advised, 2022 may not be the year for this industry because of all this competition.
More and more companies are using artificial intelligence, or AI, to streamline deliverables, make decisions, and become more efficient overall. DoorDash (NYSE:DASH) is a company that’s had great success leveraging AI to solve delivery challenges. Companies like Waymo, which focuses on self-driving taxis, are using AI to deliver their customers to where they need to be without involving a human.
So look for companies that scale technology to make their processes and products better and more efficient in the digital world.
A Unicorn Company Knows How to Disrupt
Looking for a company that’s likely to make money? Find those that disrupt their respective industries… disruption refers to innovations that have a radical impact on their respective industry. Disruptors may not have reinvented the wheel, but they know how to make the wheel cheaper, faster, and better than their competitors.
Look at Netflix (NASDAQ:NFLX) started by sending DVDs in the mail – it was cheaper and easier to have a movie on hand at home than to go out to the video store or the theater. But once streaming services came along, Netflix became a true disruptor in that space.
Disruptors are major innovators in their field, and they know how to be agile when they need to pivot. Their business models are flexible and offer easily implemented options, especially when the chips are down.