Back in 2013, it was quite rare to hear terms like billion-dollar valuation, unicorn valuation, or unicorn startup. Today, as the startup ecosystem gains traction, these terms are often heard. Startups, especially SaaS startups, aim at achieving unicorn status. In fact, becoming a unicorn is a priority for many.
Take the example of Grammarly, Pinterest, Snapchat, and Uber; they have all been startups that grew into unicorns. But how exactly did they achieve the status? But before that, what exactly is a unicorn, and how does a startup grow into a unicorn?
Have similar questions? This blog will guide you about-
- The Startup DNA
- What is a Unicorn Startup?
- Features of a B2B Unicorn Startup
- How to grow a unicorn?
- How to seek funding to become a unicorn?
Before we delve further into the topic, we should first explore the startup DNA.
The Startup DNA
While we hear many people using the word startup to refer to a newly established business. Being a newly founded company does not make it a startup! According to Paul Graham from Y Combinator, a startup is a company that is built to scale and grow.
Simply put, growth is the nucleus of a startup.
The same goes for a B2B SaaS startup as well. For starters, a B2B SaaS startup is a newly found company that offers SaaS products and/or solutions for other businesses.
For instance, ClickUp is a US-based B2B SaaS startup that offers a platform to manage workspace productivity. By integrating chats, documents, lists, and goals, the app-based platform eases internal communication and helps manage productivity.
For a startup to succeed, it must go through several different stages, from the pre-startup stage to the maturity stage.
Click here to know more about the stages of a startup.
After this, the startup may either exit or continue its efforts to grow into a unicorn. But what exactly is a unicorn startup?
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Unicorn is a venture capital jargon that is used to refer to the startups whose valuation has touched 1 billion dollars.
Aileen Lee, the founder of Cowboy Ventures, coined the term as she referred to the 39 startups that touched the billion-dollar valuation. While the existence of such startups was quite rare back then, the numbers have gone up quite a bit. As of today, there are 554 unicorn startups worldwide.
As discussed earlier, a startup must go through several stages before becoming a unicorn. These stages involve different rounds of funding. The case is the same with both B2C startups and B2B startups. Once the startup manages to get funding and establishes itself in the market, it will have to come up with ways to stay and grow in the market. Based on its efforts, a startup can grow into a unicorn and reach the 1$ billion valuation.
Dropbox, SpaceX, Grammarly, and WeWork are a few examples of unicorn startups.
Features of a B2B Unicorn Startup
First thing first! It is not an easy task being a unicorn! For a B2B SaaS startup to become a unicorn, it needs to have certain qualities, including the ability to be innovative, agile, and consumer-focused. These characteristics, along with a few others listed below –
Innovative and disruptive: For a startup to sustain, grow and become a unicorn, it must set itself apart and bring a disruption in the field of its operation. Take the example of Shopify – which is currently the leading e-commerce platform builder. From its humble beginnings to now being a top B2B company, Shopify has disrupted its use of innovation. Similarly, startups like Grammarly and Uber have also used innovation to lead their respective fields.
Based on the examples set by these startups, which have become unicorns, it can be said that innovation and the ability to create disruption are key to achieving the unicorn status.
About 38% of the present-day unicorns are B2Bs. These companies work towards one primary goal – to make it easy for their customers (other businesses) to accomplish their operations with ease. For instance, the company Slack works as a messaging platform that has been designing ease of communication in the workplace. Here, the company provided a customer-focused solution to address the challenges of internal communications within organizations.
Such dedicated customer focus to solve customer problems is one of the most important traits a startup requires to thrive in the market and become a unicorn.
The first-mover advantage
The first-mover advantage is the benefit that a company gains by being the first in the industry to introduce a disruptive product or a service. By doing so, it can establish a strong brand and a dedicated customer base before others in the market. Companies such as eBay, Microsoft, and Amazon have all had the advantage, which explains the position they are in today.
Most unicorn startups today were once the starters in the industry. Take HubSpot, for example. It provided a solution that was unique and thus had no competition. It changed the way people do things and slowly created a necessity for customers.
Based on this, we can say that the first-mover advantage, when used wisely, can boost the customer base of a startup, and thus play a critical role in its journey to becoming a unicorn.
B2B SaaS startups are technology-driven by default. But they need to adopt technology not just for their product or service but in every aspect of the operation. For instance, Airbnb and Uber used technology-driven business models through their friendly mobile apps.
Therefore, being technology-driven and optimizing it across their operations is key for B2B SaaS startups aiming to achieve the 1 billion dollar validation.
How to grow a unicorn startup?
To be a unicorn, a startup needs to be fed with enough funds. The funding size keeps growing along with the growth of the startup.
During the initial stage of the startup, the founder puts money into the establishment. This is usually called bootstrapping, and the money usually comes from the founder’s savings, or the money invested by family or friends. While this money might help start the initial formalities, the requirement for funds keeps growing as the company gets up and operating. During this phase, the founder(s) must start looking for seed funding/ angel funding.
Most seed investors turn part owners of the startup and thus share equity. The next stage has the funds from business angels who fund the startup through crowdfunding schemes and venture capitalists (VCs). In many nations, VCs get incentivized through income tax relief.
As the startup enters the growth stages, its requirement for funding also raises,and VCs play a very important role in getting it going. It will undergo a series of funding stages – Series A, Series B, etc. Eventually, the valuation of the startup raises to $1 billion. This happens when the startup manages both funding as well as growth and stays on top of the market. For this, you will have to meet not one but several venture capitalists (VCs) and convince them to invest in your startup.
How to seek funding to become a unicorn?
As we have already discussed, a unicorn is a startup with a $1 billion valuation, and for it to reach this stage, VCs and their investment is key. So how do you get them to do it for you? Here are a few best practices that you should follow before and during the funding meeting –
Prepare a failproof outreach strategy
Once you have determined that you must reach out to venture capitalists to fund your startup, the next thing for you to do is to prepare a list of potential investors. See that you approach VCs most interested in your industry, understand your offering, and most importantly, have the funds you require. You may also search for potential investors in your network.
Once you have a list, come up with an outreach strategy on how and when to reach them. This is important to fix a meeting with them.
After finalizing the VCs and getting their appointment, you must get your material in place. You must prepare a pitch deck that speaks to the investor and conveys everything you want them to know, but concisely.
Pro tip: Make sure that the pitch deck has no more than 13 to 15 slides and conveys the problem statement, product vision, skills of the team, and the capital breakdown. The point here is to make them see the potential of your startup. Having FAQs (Frequently Asked Questions) at hand is an added advantage.
Focus on your soft skills
It is not just what you say; it is also about how you say it! Keep this in mind when meeting the investors. Your investors are used to listening to such pitches every other day and want to know not just about your offering but also your team’s ability to implement it. For this, their focus is also on how you communicate and convince them. With this in mind, you must make sure that you use of your soft skills best during the meeting.
Prepare to close the deal soon
What you do after the meeting is as important as what you do before and during the meeting. Once the meeting ends, the investors get busy with the due diligence formalities. During this phase, you will have to source them with all the required data and support to ensure that the deal is soon okayed.
Building a B2B startup is tougher, and withstanding the many rounds of funding and pressure from competitors makes it even more difficult, and comes the toughest phase of all – B2B startup becoming a unicorn!40
While you may pass all the hurdles in the way and reach growth and stability. However, this is when you need to keep up with the growing efforts to reach the 1$ billion valuation status. Hope this blog has helped you know how to grow your B2B startup into a unicorn.
Stanley Deepak is an accomplished sales and marketing professional with 15+ years of experience. He loves tech products and book reading. He writes on philosophy and culture on LinkedIn.
Published June 22, 2022, Updated June 22, 2022