Do you believe in magic and myths? This article explores one that we see all the time. The ‘unicorn startup myth’ where it’s believed that successful startups can grow rapidly to become multi-billion dollar companies. It’s something to aspire for, but is it all that it’s cracked up to be?
When you’re the founder of a startup, looking at other founder’s success stories and using them to keep yourself focused and motivated is a natural and healthy thing to do. We all need somebody to look up to. And at the beginning, unicorn startups like Airbnb, Uber, Google and Facebook are the stuff of legend. They have set the bar that all other startups aspire for.
But the biggest problem with myths is that they can just as easily demotivate us as they can give us the desire to succeed. That’s because their subjects usually have godlike qualities mere mortals like the rest of us can’t hope to possess. It’s precisely the same with the myths surrounding unicorns.
Myths such as:
For you to be the next unicorn startup, you must have attended the right schools and be connected to the right people.
You must already be established in the industry you’re focused on. Outsiders need not apply.
You’ve got to be the first in that market to do what you do. New unicorn startups are always leaders, never followers.
The younger you are, the likelier you are to succeed. (Although there’s currently a court case happening in San Jose, California, that’s highlighting the dangerous impetuosity of one unicorn founder’s youth.)
In short, there are a lot of rules and expectations circling around what it takes to be a successful startup, and they often come from Accelerators and Venture Capitalists.
At Robot Mascot, we’ve never entertained outdated startup myths. We believe that it’s within anyone’s capability to create a successful startup. So we’ve committed ourselves to make the startup process more accessible to everybody.
If you’ve got a fantastic idea and the passion and drive to make it a reality, there’s no reason you can’t become an investable entrepreneur. Similarly, you don’t need any prior knowledge or expertise to help you succeed. Your weakness can often be your biggest strength.
So long as you do the homework and hard work, any startup might become a unicorn.
Let’s debunk some myths
Author and venture capitalist Ali Tamaseb spent four years conducting an extensive data-driven study on startups. He recently published his findings in the book Super Founders: What Data Reveals About Billion-Dollar Startups. It’s a fascinating read, and what Tamaseb discovered about ‘conventional’ startups versus unicorn startups supports everything we advocate in our own work.
We’ve always known we were on the right track, and our clients’ success stories have proved it. However, it’s always good to see our proposition validated by somebody so influential who’s taken so much time to crunch the numbers.
So if you’ve ever let the myths fool you into thinking that your startup doesn’t have what it takes to become a unicorn, here are just a few of the surprising and encouraging facts that Ali Tamaseb’s research revealed:
1. Being a non-technical founder isn’t a disadvantage.
50.5% of founding CEOs of unicorn startups were non-technical (the technical expert was most likely the second-ranking person in the company, often the CTO.)
2. Accelerators do not increase your chance of success.
90% of unicorns did not go through an Accelerator. Of the rest who did, the Y Combinator accelerator had the most unicorn successes.
3. Age and success are not correlated.
The median age for tech founders was 34. The median age for healthcare/biotech founders was 42. In other words, you don’t have to be a wunderkind (or a know-it-all methuselah) to become a startup success story.
4. You don’t have to be the first to market with your idea.
85% of unicorns had competitors from the moment they started, although over 50% were competing with large, incumbent, old-school companies when they got founded, and 20% were competing in fragmented markets with a dozen or more competitors, none of whom were dominant.
5. Market differentiation is the key to success, not a lack of competition.
More than 60% of unicorns had a higher differentiation in their core product offering than their competitors.
6. You don’t need previous sector expertise.
Only 30% of unicorn startup founders in consumer technologies had previously worked in the same industry, and only 40% of founders of unicorn startups in the enterprise/SaaS space had worked in the same industry before. The only exceptions were healthcare and biotech startups. According to Tamaseb’s findings, it was much more important for a founder to possess soft skills, such as managing a team, sales and leveraging, and having a strong network and resources. Tamaseb discovered that the founders who used their resources to learn more than anyone else about their sector were ultimately the most exceptional.
Valuable insights for investable entrepreneurs
It’s not just myths that Tamaseb’s research has debunked. In fact, his findings have revealed some invaluable insights too.
These are the kind of insights it’s worth having in your armoury, because knowing what they are so that you can build them into your investable entrepreneur strategy will differentiate you even farther from your competition.
1. The reputation of your initial backers matters.
Over 60% of unicorns raised a Seed or Series A from a ‘Tier One VC firm’. Only 18% of the other startups managed to do the same.
2. Even though previous entrepreneurial experience is important, you don’t have to be successful.
60% of unicorn founders had previously started something else, and a good deal of lost money. Rather than being scared off by a founder’s previous failures, the data suggests many investors believe that practice makes perfect!
3. Unicorns raise big rounds from the very start.
Unicorn companies tend to raise almost 2 x as much as non-unicorns in their first round of funding, and more than 3x as much in their second-round; i.e. 1st round — $4million vs $2.2million, 2nd round — $15million vs $4million.
4. Unicorns were much more likely to save their customers time and money.
People gravitate more towards startups that help them save time and money rather than those that offer convenience or entertainment.
5. Painkillers beat vitamins pills.
Painkillers (a product that takes the customer’s pain points away) were much more likely to become a unicorn than vitamin pills (a product that improves existing methods.) However, 30% of all unicorns were vitamin pills, and unicorns with habit-forming products and a strong community-building brand were also very successful.
6. The size of the market matters.
Startups operating in large markets at the time of funding were more likely to become unicorns.
When it comes to unicorn myths, don’t believe the hype. Becoming a successful startup, unicorn, or even decacorn is within everybody’s grasp.
Get the blueprint you need to help you achieve success through my bestselling book, Investable Entrepreneur. You can download a free copy here.