With all the talk recently around unicorn startups,private IPOs (which makes no sense), and new startups joining the billion dollar club we thought we would put together our five key ingredients necessary to score a billion dollar valuation. What are the odds of your startup becoming a unicorn? According to CB Insights, only 1.28%. Pretty slim.
1. Market Size
– I think this would go without saying. Most markets are competitive and trying to gain even 10% can be hard if the market is not big enough. Further, from a VC perspective smaller markets do not allow for the type of return venture capital investors are looking for. So how big? Think in the tens of billions.
– A great team that can execute on a change in strategy is important. Startups often pivot, change strategies, and find the need to shift do to market or other conditions. Having a good team in place that can execute and be flexible enough is important. So what makes a good team? Smart, works well together, buys into company culture, etc….you get it..
3. Product Quality
– You have to have a superior product that satisfies qualities of a great product. So what are those? See our blog post of qualities of a great product.
– Developing hypotheses and testing which solutions might work for customers faster than the competition. I have nothing empirical to base this on but it seems that given the world we live in where multiple startups come up with the same idea independently refining your solutions with speed and accuracy based on feedback of empirical data has to be one factor that is ultimately important. Also, never hurts to have first move advantage.
– Call it whatever you want but there is a certain amount of the intangible in making everything come together. I say this because most factors are out of the control of even the best of teams. I’m sure a lot of people would disagree with this one but so be it.
What factors do you think are important?