Unicorn
Also known as Unicorn Company, Unicorn Startup, Billion-Dollar Startup
A unicorn is a privately held company with a valuation of $1 billion or more based on its most recent priced funding round. The term, coined by Aileen Lee in 2013, has expanded from a handful of companies at the time to more than a thousand globally, concentrated in the US, China, and India.
Formula
Post-money valuation = Last preferred share price × Fully diluted shares outstanding- Last preferred share price
- Price paid per share in the most recent priced equity round
- Fully diluted shares outstanding
- All common, preferred, options, warrants, and convertible notes on as-converted basis
In depth
The unicorn label applies to any privately held company whose most recent priced funding round implies a post-money valuation of $1B or more. The formula is mechanical: last preferred share price times fully diluted shares outstanding. If a Series D priced 10M new shares at $25 against a 200M fully diluted base, the post-money is $5B and the company is a unicorn.
The number is widely cited and widely misunderstood. It is the price a single new investor paid for a single class of preferred shares, extrapolated across the entire cap table as if all shares were equivalent. They are not. Preferred shares carry liquidation preferences, anti-dilution ratchets, redemption rights, and other downside protections that common does not. Gornall and Strebulaev quantified the gap: reported unicorn post-money valuations average 50% above fair value. Their model treated preferred and common separately and produced fair value estimates substantially below the headline.
Services such as CB Insights, PitchBook, and Dealroom track the global unicorn population on a rolling basis. The count has expanded from the original handful identified in 2013 into the thousands, driven by long stretches of cheap growth capital and successive waves of platform investing. Counts and category leaders shift quarter to quarter, so any live figure should be read from a current tracker.
Why it matters
Unicorn status was originally a rarity signal. With well over a thousand companies above the threshold and decacorns and hectocorns above that, the label has become a marketing fact rather than a competitive moat. The diligence question worth asking is not whether a company is a unicorn but what its ARR, growth, gross margin, and runway look like. A $1.1B unicorn with $20M ARR and 18 months of runway is in a different position than a $1.1B unicorn at $200M ARR with positive cash flow.
For venture funds, holding unicorn positions also drives mark-up cycles in fund accounting. A markup from $800M to $1.2B in a follow-on round adds 50% to RVPI even though no cash has changed hands. LPs who read TVPI without context can misread this as realized progress. The transition from RVPI to DPI requires an actual exit at a price the market clears.
Worked example
A Series D round prices and tips the company into unicorn territory:
| Cap table component | Shares | Implied value |
|---|---|---|
| Common stock (founders, employees) | 120,000,000 | n/a |
| Series A preferred | 30,000,000 | n/a |
| Series B preferred | 20,000,000 | n/a |
| Series C preferred | 20,000,000 | n/a |
| Series D preferred (new round) | 10,000,000 | $250M raised |
| Total fully diluted | 200,000,000 |
Series D priced at $25.00 per share. The post-money calculation:
Post-money valuation = $25.00 × 200,000,000 = $5,000,000,000
= $5.0B → unicorn (and decacorn-adjacent)
A VC holding 15M shares of Series B (cost basis $3.00) marks the position at last priced round:
Position marked value: 15,000,000 × $25.00 = $375M
Cost basis: 15,000,000 × $3.00 = $45M
Marked MOIC: 8.3x
The $375M mark is not realizable until exit. The Gornall-Strebulaev correction suggests fair value of common-equivalent shares would land closer to $200-220M after adjusting for preference stack and downside protections in the Series D terms.
Frequently asked
Who coined the term unicorn?
Aileen Lee in a 2013 TechCrunch essay, when the population of $1B+ private software companies was small enough to fit on one page. The threshold has not moved with inflation or with the growth of the population, which is part of why decacorn ($10B+) and hectocorn ($100B+) emerged as additional tiers.
How is unicorn valuation actually calculated?
Last preferred share price times fully diluted shares outstanding. The number is a post-money valuation, not a market-clearing price. It reflects what a single new investor paid for a single class of preferred, multiplied across the whole cap table as if all shares were equivalent. They are not, because preferred carries downside protection that common does not.
How many unicorns exist globally today?
The global population has expanded from a handful in 2013 to over a thousand companies tracked by services such as CB Insights, PitchBook, and Dealroom. The US, China, and India host the large majority. Counts and category leaders shift quarter to quarter, so consult a live tracker for current figures.
Why are unicorn valuations criticized as overstated?
Gornall and Strebulaev's research finds that reported unicorn post-money valuations average roughly 50% above fair value because they treat preferred and common as equally valuable when preferred has senior liquidation rights, anti-dilution, and downside protection that common lacks. The headline number is a price for one share class, not for the whole company.
Is unicorn status a meaningful signal?
Less than it once was. With more than a thousand companies above the $1B threshold globally, unicorn status no longer differentiates. Sophisticated allocators look at ARR, growth rate, gross margin, and runway, not the headline valuation alone.