How far is a startup from becoming a unicorn?
Incubators and accelerators pursue the dream of creating the next unicorn. Entrepreneurs have the same vision of becoming one too, but in the meantime, what is happening? What are the steps that a startup must follow to achieve that goal?
A ‘Unicorn’ is a term used to describe companies with valuations over $1 billion. The most outstanding characteristics of unicorns are consumer-centric models, disruptive innovation, investment from private companies, and technology-driven business models.
In Orion Technology Park, the entrepreneurship programs are focused on the previous features to provide the best mentoring and services to startups with high potential. We know that the success of a company denotes the integration of the best follow-up concerning the progress on areas such as product and customer development, sales, operations, company development, funding, and human-centered focus.
The reality is that startups’ profiles vary among them and their growing rates too. Sometimes it is difficult for entrepreneurs to properly locate themselves in this path and to identify how far are their startups from becoming a true unicorn. That is why in Orion, we began to allocate them in a simple scale which synthesizes the milestones through its path to success, this includes: ‘ant’, ‘cricket’, ‘chameleon’, ‘pony’, ‘centaur’, and finally: ‘unicorn’.
Why and how do we compare the performance of a startup with such animals?
“If you think someone is too small to have an impact, try getting to bed with a mosquito in the room”. -Anita Roddick.
Ensuing this vision, the goal to use this scale is to track the performance of a startup during its incubation and acceleration programs. Consequently, the entrepreneurs can focus on the next precise steps to take their startup to the following level. The growing rate is measured on different routes. As we work with technology-based projects, the product development is the main concern needed to be considered, and based on it, the rest of the areas must be harmonized. Every category of this scale requires not only certain degree of progress of the startup but also in the personal development of the entrepreneurs. Funding firms need to believe in the vision set-up by the startup founders they agree to work with. Entrepreneurs should have the ability to convince the investors about the growing capabilities of their business and the methods to make it profitable in a certain period.
Below is the description of each of the categories under which a startup is categorized:
1. Ant
Ants (insects) are members of the family of social animals, that means they live in organized colonies, which represents that they are related to complex social organization. How is this associated with startups? At this phase, considered as ‘ants’, entrepreneurs are segmented, they have their antennae focused on how to develop their idea, what resourses they need and with whom are they supposed to link. Startups work as ant colonies and superorganisms because they appear to operate as a single entity with the help of strategic allies, mentoring, and extra connections. In terms of progress at this point, the startup has properly identified a market problem and its corresponding potential customers. Additionally, they have a brief idea about what technology to develop, an investment strategy, and identification of risky factors as time frames and associated costs. Here is where entrepreneurs work on parallel scenarios to find out which path is the most convenient for the project. In the selling route, entrepreneurs must have identified the market size, so they could forecast the success of their idea. Things may not always add-up as planned, working in a business community or startup develops personal skills such as stress and frustration management. At this point entrepreneurs have conscience about their environment and are working to find out the best plan to develop a profitable company.
2. Cricket
What is the first idea that comes to your mind when you hear the word ‘cricket’? Obviously that peculiar sound which characterizes this insect. That is the reason we call our startups at this stage as ‘crickets’. At this point they begin to make noise; people start to pay attention and know about them. The startup stands high, loud and persistent so their impact sounds with echo at least in the entrepreneurs’ environment. At this stage, the product proposed in the previous stage is validated as feasible through the testing of product-solution. As customers began to know about the startup, they expect to buy its merchandise, so traction starts but just as a waiting list, the product is not ready yet. In terms of funding, the startup begins to participate in contests and public funds. Talking about team agreements, the commitment from every member is stronger than in the beginning. The conflicts management must be worked in a collective model so that everyone achieves relational intelligence. Open minds are needed to get into regulations and quality systems that the developed product may include. As a curious fact, crickets’ antennas can be as long or longer than their body, so what is expected from entrepreneurs at this point is to think and make bigger things than what they could imagine; their participation in contests could represent the big difference between growing in a regular or exponential way.
3. Chameleon
At this point, we put the insects’ analogy aside to move to the contextualization of a larger figure, and speaking of startups, to a more solid and defined entity. Chameleons are known for their color changes and startups in this stage must adapt constantly. They also have a long, sticky and retractable tongue with which they catch their preys at distance. Taking about startups and its entrepreneurs, those characteristics relate directly because here is when entrepreneurs must get out of the building and sell. They need to develop skills related to customer acquisition and be capable to define and measure indicators. At this stage, the company’s development has undergone production tests and delivering logistics to get prepared for a bigger leap in this scale. In terms of funding, entrepreneurship skills are enhanced as crowdfunding is involved in raising capital through contact with a larger net in the community. In order to reach this progress level, the startup must have its financial valuation, as well as its medium-term cost support.
4. Pony
Ponies are identified as the miniature version of a horse, as well as having docile behaviors. In startup development, this comparison works in the same way. At this phase, startups seem as small companies with high potential since their degree of growth has reached high standards in product development. In this stage the startup has operational design, its production processes are well-defined, it has reached stable production rate, and its launch is tracked through previous defined indicators. Here is where customers get in touch for the first time with the company in a formal and official way. The impact on them should be considered an extraordinary experience, such as that of a child with a pony. Talking about funding, startups in this stage are working through acceleration programs and with seed capital. Here is where the startup is growing up as a real and profitable company. Its structure gets solid through the basis it has been building during the last stages, employees appear in a more regular way. We may now consider that their sales grow in an exponential path.
5. Centaur
The next step is harder to reach. It consists of persisting and operating with specific strategies that speed-up the growth of the startup quickly and concretely. The centaurs are creatures in Greek mythology with the particularity of being half human and half horses. Alluding to the development of a startup, this represents being one step previous from becoming a unicorn. This stage considers growing in terms of financial valuation, reaching to $100 million USD. Although the startup can be considered as a stable company, organizational and human development are still needed. Entrepreneurs continue working on the progress of their interpersonal skills within the team members and as a public structure to the market and investors.
6. Unicorn
This category is the universal figure, which any entrepreneur intends to reach. Companies in this stage have valuations over $1 billion. The main characteristic of businesses in this phase is that they were committed to rapid growth since day one. Entrepreneurs are driven to create disruptive ideas and to believe that the product or service they offer will radically improve users’ lives.
Wrap-up
In conclusion, despite the category to be analyzed, the entrepreneur profile in each step involves visionaries, disruptors, founders, and builders who want to create change and to imagine a better future. The road to travel is hard, entrepreneurs experience highs and lows, pivots, failures, and countless experiences that determine their success and direction of their startup. Our job as entrepreneurship programs’ coordinators is to identify the talent, look for the best opportunities of success to each startup, according to their development level and both vision and real scope. In this way, we work at the same trail with the entrepreneurs, sharing their goals, enthusiasm and concerns about their projects.
The objective is high, but completely possible in an ecosystem where people are committed. Those dreams seem conceivable according to a rigorous tracking of startups’ needs, possibilities, and advantages among others.
According to professional investors and experts, business is about people, products, and processes, that is why the category scale for startups is reflected as a measurable process. The scale has clear and concise indicators that represent the great achievements of a startup at different stages of its development. In Orion Technology Park, we have escorted entrepreneurs for a long time, we have seen startups born and grow, so now we are ready to face unicorns!
