The term unicorn company was extremely rare when it was introduced, but the concept has become increasingly ubiquitous across the financial landscape since then. But what is a unicorn startup, where did the definition of a unicorn company come from, why has the concept persisted over time, and what’s so unique about these companies today? We’ll look at those topics and more in this article.
All numbers and data included in this article are accurate per PitchBook Platform data as of November 26, 2024. Note that platform data is subject to change often.
What is a unicorn startup in venture capital?
Generally speaking, a venture capital unicorn is a privately held company that’s valued at $1 billion or more. For extra precision, PitchBook defines unicorn companies with a slightly narrower lens—a venture-backed company that has raised a round at post-money valuation of $1 billion or more.
Our analysts stop considering a company a unicorn if it’s no longer venture-backed because it went public or was acquired or if its valuation falls back below the $1 billion threshold, whether because it went out of business or had a down round.
The state of unicorn startups headed into 2025
Per PitchBook’s unicorn companies tracker, there are 1,422 active unicorns globally. Those unicorn startups have raised a total of $846 billion, and their cumulatiive value is a staggering $4.5 trillion.
Despite those jaw-dropping figures, fewer unicorns are being minted annually overall. From 2016 to 2020, the number of new unicorns increased steadily from 65 to 198. Conditions in 2021 paved a way for an explosion of new unicorns, wherein 629 startups reached unicorn status. Since then, unicorn growth has dropped off. 2022 saw 363 companies inducted into the rarified class, with a big dip to 103 in 2023. 2024 is shaping up to be about on par with 2023, with 102 new global unicorns minted from January through November 26, 2024.
In a Analyst Note report, PitchBook Lead Analyst Kyle Stanford covered the emerging trend of companies—including unicorns—staying private for longer, and the pressure that once-standard terms can face when exposed to extended hold times.
More specifically, 10 years has been the standard venture fund life term for decades. As the market grew out of the Global Financial Crisis, private companies started to remain private for longer, altering the standard timeline for VC funds. Today, US unicorns are worth about $2.5 trillion, and they account for 63.4%—about two thirds—of the US market value in VC-backed companies. But nearly 40% of those US unicorns have been held in a portfolio for at least nine years, dragging IRRs and holding back distributions.
“Looking ahead, for more companies to reach the unicorn status, increased activity from crossover investors will be needed,” Stanford said. “The later-stages of VC have been the most capital starved over the past few years, and that’s one of the reasons we saw so few new companies reach unicorn status during that time. The economy has remained resilient, and if it is able to turn a corned toward strength and growth, we should see another surge of companies reach $1 billion in valuation, especially if IPO and M&A markets begin to show signs of life.”
Why are they called unicorns?
Coined in 2013 by venture capitalist Aileen Lee, the VC unicorn company terminology highlighted the rarity—at that time—of companies valued at $1 billion+. Lee sorted through 60,000 software and internet-based companies that received VC funding between 2003 and 2013. She found that just 39 of those startups reached the $1 billion threshold, making them extremely elusive and opportune investments.
Who is Aileen Lee?
Lee was the first person to put a name and definition around the special class of startups we call VC unicorn startups. But beyond that, her investing career has been prolific. She’s an angel investor and the founder and managing partner of Cowboy Ventures, a VC firm based in Palo Alto, whose early investment in Dollar Shave Club saw a $1 billion exit to Unilever in 2016.
Since it was founded in 2012, Lee’s firm has made 180 investments, with an active portfolio of 48 companies, 55 exits, and a median valuation of $28.8 million, per PitchBook Platform data. Most recently, Cowboy Ventures has invested in Portex and Elementary Data.
Before that, Lee started her career at Morgan Stanley, held operating roles at Gap Inc., The North Face, and Odwalla, and was the CEO of RMG Networks. In 1999, she joined the venture firm Kleiner Perkins Caufield & Byers, where she worked with a variety of consumer, enterprise, media, and green tech teams.
What are the characteristics of unicorn companies?
To start, unicorn companies are generally fast growing. They’re also increasingly in the AI space.
“Maybe more now than ever, many companies that are becoming unicorns are in the AI vertical,” Stanford says. “AI technologies are receiving large premiums in this market—so receiving a $1 billion+ valuation based on the higher multiples allows these companies to become unicorns.”
Additionally, investors will often use the term “transformational” for unicorns. Stanford says that outside of technological advances, these companies are developing business models that are transforming their specific segments.
“Uber transformed transportation worldwide. Slack transformed how businesses communicate internally. The list goes on. They’re going to be transforming large markets—no matter the technology,” he says.
How many US unicorn companies are there?
As noted above, there are 1,422 global unicorns as of November 26, 2024. Zeroing in on US unicorns, there were 224 when this article was first published in 2019—building on a previous high of 172 in 2018. Four years later, by the end of 2023, there were 723 active unicorn companies in the US, though just 45 new unicorns were added during that 12-month period (the fewest since 2017).
With a little over a month left of 2024, 58 new US-based unicorns—with a total valuation of $117.7 billion—have been minted. 39 of those companies are in the information technology space, with B2B and healthcare coming through in a distant tie for second with five companies each. Month-by-month, the United States’ 2024 class of new unicorns includes:
- January 2024: Doc.com, a health tech platform that provides free basic healthcare services through its app
- February 2024: Ascend Elements, a manufacturer of battery materials that improve performance, reduce cost, and enhance efficiency
- March 2024: Celestial AI, the developer of a data center and AI computing platform to serve deep learning and machine learning applications
- April 2024: Nexamp, provider of turnkey clean energy services intended to reduce energy costs and carbon emissions
- May 2024: Altruist, a digital investment platform designed to help financial advisors serve their clients
- June 2024: xAI, an AI platform designed to accelerate human scientific discovery
- July 2024: Rula, a therapy platform designed to manage mental healthcare
- August 2024: Story Protocol, a web3 technology that improves how narrative universes are created
- September 2024: Rentberry, a decentralized home rental platform designed to streamline the rental housing process
- October 2024: EvenUp, a legal practice management software designed to get fair trails and outcomes in personal injury cases
Are VC unicorn companies still a rare occurrence?
Over the years, unicorn companies have become decidedly less rare, but the annual rate at which new companies are added to the unicorn ranks ebbs and flows based on market conditions. For example, as previously mentioned, there was a precipitous decline in newly minted VC unicorn startups in 2024 vs. 2021. However, the overall number of active unicorns has increased—in increments of various size—every year for at least the last decade.
Although it’s more common for a startup to reach unicorn status in 2024 than it was when the term was introduced in 2013, these $1 billion+ post-money valuations are still incredibly impressive. Unicorn companies are under a microscope—watched and reported on by those with an interest in the private markets’ most prominent players.
What are the benefits of being a unicorn company and what challenges do they face?
According to Stanford, the benefits and current challenges unicorn companies might experience include:
Benefits
- Increased attention from investors
- A boost to customer acquisition because of brand awareness
- More successful recruiting efforts, attracting top talent through name recognition and their high valuations
Challenges
- It’s a tough time to raise capital
- Heightened scrutiny
- A lack of exit options—most unicorns will need to IPO
“The number of acquirers able to pay up for a unicorn is smaller now. This isn’t always presented as a challenge—because an IPO is a great exit option—but in markets like today’s it is an added challenge because of the number of unicorns and the lower numbers of IPOs occurring,” Stanford says.
Why is the number of global active unicorn companies increasing?
One explanation for the explosion in unicorn companies—from Aileen Lee’s original list of 39 to today’s 1,422—is the ever-increasing convergence between the private and public markets. In the past, companies often relied on IPOs to generate the capital they needed to scale operations.
Today, however, companies are able to raise larger amounts of private funding early on, allowing them to reach billion-dollar valuations without having to go public. Even though unicorn deal activity has fluctuated up and down in recent years and the number of new unicorns has slowed since 2021’s high, the overall number of global unicorns is still growing.
Global Unicorn Deal Activity
Data accurate as of November 26, 2024
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