The Tech Unicorn…Where does this fascinating beast come from?
The term was coined by seed investor and Cowboy Ventures founder Aileen Lee in 2013 in her article for TechCrunch, “Welcome To The Unicorn Club: Learning from Billion-Dollar Startups.”
Her definition of a unicorn is “U.S.-based software companies started since 2003 and valued at over $1 billion by public or private market investors.” This definition has now been streamlined into “privately held startups worth more than $1bn.” (Famous unicorns include Uber, Airbnb, Pinterest and Lyft.)
At the time of writing, Lee counted 39 such companies that belonged to the “Unicorn Club,” a mere .07% of startups. (By 2019, this number is 156, according to The Economist.) Lee was obviously searching for a term that connoted rarity, desirability. She takes the metaphor and runs with it…and finance writers have delighted in it for the past six years.
I’m fascinated by the language that Lee uses to make the tech unicorn language catch. Lee’s phrasing in her pronouncement that “San Francisco (not the Valley) now reigns as the home of unicorns” trades in stereotypes about fantasy-worlds. There’s a magical land you can go to, where you can spot the beast of your dreams! (Can a city reign? Eh, whatever…) When Lee writes that “four unicorns were born per year,” she’s giving these companies animal life, and infusing the moment of birth a suddenness that goes against her later, more sober observation that “inexperienced, twentysomething founders were an outlier. Companies with well-educated, thirtysomething co-founders who have history together have built the most successes”. The narrative of unicorn “birth” also goes against her more sober analysis that unicorns are gradually formed over an average seven year of hard work to achieve liquidity by co-founders with “who had previously founded a company.” This is a nice way of saying that a lot of ponies or still-born unicorn babies have to be born before the live unicorn comes around.
ANYWAYS, unicorns being born sounds better.
Once the unicorn is born, there’s a “Unicorn Club”! But wait…There is no club. How could there be? Unicorns, as creatures, can hang out. Unicorn companies cannot hang out, because companies are made of individuals. Therefore, the company gets implicitly associated with a founder or leader. (Indeed, in The Economist’s April 2019 article, “charismatic bosses” are key to unicorn recognizability…the unicorn is the boss as much as the company.)
Then there are the “super-unicorns” (worth more than $100 billion e.g. Facebook/Google/Amazon).
All this linguistic excess unites together eight-year-old girls and adult businesspeople in mutual glee. The currency of the term “unicorn” in discussions about tech companies and investment proves that grownup, as much as children, can’t get enough of a good story.
A downside…in the ways that unicorns in popular culture bear no trace of their Indian and Mesopatamian origins, tech unicorns are also painted white. Lee notes that “There is very little diversity among founders in the Unicorn Club.” Elizabeth Holmes, CEO of Theranos, was hailed as a female unicorn-wrangler, which led to headlines like “The Blood Unicorn Theranos was Just a Fairy Tale: Founder Elizabeth Holmes spun a beautiful fantasy for investors, not so much for patients” and “Can Elizabeth Holmes Save Her Unicorn: Theranos wants to convince the world it’s for real.”
Well, Theranos turned out to be a fantasy and so are a lot of unicorns.
More recently, The Economist’s April 20th-26th 2019 edition featured a cover image of five ponies wearing dunce caps as horns as they graze in the moneyed fields outside of San Francisco’s Golden Gate Bridge. One in the background has been spooked and runs off…losing its horn and its magical aura.
The leader article accompanying the image contends that “mere ponies are being presented as unicorns” and observes that “a dozen unicorns” will post “combined losses of $14 bn” (13).
The author speaks of “Today’s unicorn-breeding industry” run amok and the main briefing, “Unicorns going to market: Herd instincts” tries to account for the “population boom.” The main article features unicorns behaving very much like lemmings. “The design and manufacture of unicorns has become industrialised” and therefore the current generation of new unicorns don’t look or act like they did before.
Finally, “Herd instincts” ends by noting “a growing concern that the innovation produced by some unicorns does not leave society better off.” (Specifically, the way the gig economy powered by Uber etc. covers for the precariousness of workers’ lives.) This is a curious ethical turn, considering that investment and profit is only rarely assumed to correlate with goodness. But the unicorn metaphor provides a way to turn from the sparkle-and-rainbows excitement about innovation into thinking about the effect of technology on society at large. Unicorns aren’t just icons of rarity and value – they’re also symbols of healing and goodness. Adding this element to the tech unicorn is something to get excited about.
The Economist has amazing wordplay, such as “Alphabet (née Google)” – née – neigh – get it?