STUDY | How to ensure your business doesn’t become a unicorn

Klarna and Spotify are Swedish examples of unicorns. These types of companies are rare, but now research can reveal which corporate decisions both increase and decrease the chances of achieving unicorn status.

A unicorn is a privately held start-up company that is valued at or has an exit of over one billion dollars. Only a little more than 2,800 companies worldwide have achieved unicorn status since 2000, according to the Dealroom database.

In a study published earlier this year, researchers studied 125 digital mental health platform companies, 12 of which became unicorns. In the study, the researchers identified which combinations of decisions affect the chances of achieving unicorn status. The factors studied are: timing of capital raising, sources of funding, digital technology and choice of business model.

Three decision combinations that have very little chance of success:

• No early funding, government funding and deep technology = 0.95% probability.
• No early funding and no government funding, regardless of technology = 0.16% probability.
• Early funding, government funding and deep technology = 1.75% probability.
  

At the same time, the study points to combinations that increase chances: for example, early-stage funding platforms, no government funding and deep tech targeting the B2B market. The research findings can provide entrepreneurs and investors with empirical support for making strategic decisions in a digital age, where intuition over facts has traditionally dominated.

By combining practical experience with data analytics, such as decision trees, industry players can better navigate uncertainty – and at the same time become aware of which decisions almost preclude success.

More about the study and the researchers
Article What entrepreneurial decisions enable the breeding of digital platform unicorns? is published in the scientific journal Strategic Entrepreneurship Journal. The authors are Sea Matilda Bez, University of Montpellier, France, Isabel Narbón-Perpiña, Universitat Autònoma de Barcelona, Spain and Asta Pundziene and Rima Sermontyte-Baniule both at Kaunas University of Technology, Lithuania.