Startup Valuation in the $10B Era

Defining the Startup Landscape: Beyond the Unicorn

The question of what constitutes a startup is frequently debated, and a definitive answer remains elusive. The definition has become increasingly complex, prompting the response that it depends on the specific context.

Historically, a $1 billion valuation was often used as a benchmark, signifying a company’s transition from startup to something more established. However, the proliferation of “unicorn” startups, fueled by venture capital, has blurred this line.

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The term “unicorn” has largely lost its original significance. It once denoted exceptional success, identifying companies that significantly outperformed their peers.

Today, with over 907 unicorns, the label simply suggests a startup that is, or should be, well-managed. This diminished meaning reduces its practical value.

Could a $10 billion valuation serve as a more effective filter, distinguishing companies demanding close attention from those still developing and showing limited tangible results? Perhaps, as it represents a more meaningful threshold.

This idea isn’t new. Dan Primack proposed the term “dragons” for companies valued at $10 billion or more, and Crunchbase News recently explored the concept of “decacorns,” a term already in use.

The dilution of the “unicorn” label stems from its increased frequency. In 2013, when Aileen Lee coined the term, the number of unicorns created was fewer than the number of decacorns appearing today – illustrating the dramatic shift in the startup ecosystem over the past decade.

Lee herself recognized the need to differentiate within the unicorn category:

While the idea of a “super-unicorn” didn’t gain traction, companies exceeding $100 billion in valuation pre-IPO remain rare, preventing the widespread adoption of the term “centicorn.” Nevertheless, the $10 billion mark stands out.

Decacorn Growth: A Statistical Overview

Recent data from Crunchbase News, analyzed by Gené Teare, reveals the increasing number of decacorns:

2017 decacorns minted: 3
2018 decacorns minted: 13
2019 decacorns minted: 5
2020 decacorns minted: 15
2021 decacorns minted: 30

The number of decacorns created in 2021 is projected to surpass the 2020 record by a significant margin.

This trend demonstrates that not only are more decacorns being created now than when the term “unicorn” emerged, but the sheer volume is substantially higher. This underscores the limitations of relying solely on valuation as a defining characteristic.

We require some form of measurement to avoid mischaracterizing companies worth $13 billion with 1,300 employees and $130 million in revenue as mere “startups.” These organizations, having transitioned to more experienced leadership, are effectively mature companies, and the private markets should reflect this.

Ideally, this categorization would be based on revenue, but many private companies are hesitant to disclose this information.

Therefore, a revised framework might look like this:

Private company with a less than $1 billion valuation: Startup
Private company with a greater than $1 billion valuation, but less than $10 billion: Unicorn
Private company with a greater than $10 billion valuation: Anticipated IPO

Categorizing Companies by Stage

Startups are focused on rapid product development and revenue growth, often prioritizing these over immediate profitability.

Unicorns are well-funded private companies, typically maintaining a growth-oriented approach but with increasing attention to preparing for a potential IPO.

Anticipated IPOs represent private companies that have reached a level of maturity and financial strength that suggests an imminent public offering.

These definitions are not without their flaws, and the term “Anticipated IPO” may not gain widespread acceptance. However, it provides a starting point for categorizing private-market companies. Ultimately, $10 billion represents a new benchmark, replacing the previous $1 billion threshold.

It’s worth noting that Lee’s original analysis focused on U.S.-based companies. However, even expanding the geographic scope of her analysis, the core point remains valid.