What is a unicorn startup?
Short answer
A unicorn is a privately held startup valued at more than US$1 billion. The term was coined in 2013 by venture investor Aileen Lee. The valuation is usually the figure implied by its latest funding round.
Where the term comes from
Aileen Lee, founder of Cowboy Ventures, used "unicorn" in 2013 for a startup valued at US$1 billion or more because such companies were statistically rare. Companies valued above US$10 billion are sometimes called decacorns. The labels are informal and not defined by any regulator.
How the valuation is set
A private company has no market price. Its valuation comes from the price investors pay for new shares in its latest funding round, multiplied by the number of shares, which is the post-money valuation. Terms can matter as much as the headline: preferences that let some investors recover money first can mean the common shares are worth less than the headline implies.
Post-money valuation = price per share in the latest round x fully diluted sharesWhat changes the status
A company stops being a unicorn when it lists on a stock exchange, is acquired, or raises a "down round" at a lower valuation. It can keep the label in media even if its value has fallen since the last round. Unicorns are found in many countries and sectors, including fintech, software, AI and electric vehicles.