First of all, I will begin by highlighting an old Wall Street saying that it is better to be lucky than smart. That being said, most Unicorns are not build by accidents but by great vision, passion of founder, great playbook, be customer centric, great grip on use of capital and many more.
So, let me highlight what are the early indicators if you are creating a Unicorn or what are some of the things that are important in order to make a Unicorn.
1. Big addressable opportunity: If you aim for star, you get a moon. So, most Unicorns in the making will very likely have big addressable market opportunity. My suggestion to all budding entrepreneurs is to always focus on big addressable opportunity. In startups nothing goes straight-line but if you have chosen a market that is very large or growing very fast, you will be able to carve out a sizable business for yourself.
2. Vision: Vision is perhaps the most important ingredient for a startup that a founder brings on the table. I always believe that something that appears as dirt or pebble to most, should appear as size or rock or a mountain to the founder. In modern history since 1,500 Ad, especially starting from industrial revolution in Europe in 1740, we have seen time and again, that vision of a founder ends up creating a world-class company. So for a unicorn, vision is the foundation.
3. Role of Capital: Most entrepreneur either under estimate the role of capital in building a Unicorn and many find it more difficult to raise money than it is. In my view, among the top 10 things what does it take to create a Unicorn, capital will be first 6 and remaining will be vision, team, passion, and idea. So, if you want to create a Unicorn, do not think about bootstrapping or be too much concerned about dilution from each round of capital.
4. Team: I have written about this time and again. Team is very important part of building a Unicorn. And one must look for these five things in the team members: commitment, character, capacity, craving and capabilities. Please read my previous post on this topic: https://www.linkedin.com/pulse/5cs-look-your-start-ups-dream-team-sandeep-aggarwal?trk=mp-author-card
5. Playbook: I started working on ShopClues from 10th October 2010 in my house in California and it was about the six months before second person bought into my energy, passion, idea, visions and obsessions. But by the time we launched ShopClues on 21st November 2011, I already had a playbook for next 10 years. This playbook included, a financial model for next 10 years, marketing strategy, BD strategy, unit economics, product roadmap, execution plan by milestones and so on. And this not only helped me but helps ShopClues even today, in terms of be ready for anything vs getting too many surprises.
6. Early signs of tractions: In every startup there is stage, wherein you are growing probably 15-20 times faster than national GDP but also 3 to 5 times faster than overall industry growth in which the startup is operating. And this phase can last anywhere between 12 months to 3 years and longer it lasts, the higher likelihood it creates that the startup is on its way to be an Unicorn. That being said, I would also like to highlight one more thing which is that you can not have marginal revenue and unfavorable margin cost and that means, startup’s fundamental must improve with each $100mil more it adds into its revenue.
7. Chaos and Confusion: If a startup has Level 5.Six Sigma, or world-class processes or greatest training program, of course they would not hurt but that also means, the company has likely did not see hyper growth phase period which takes away time for you to think about Six Sigma, processes or trainings but you are full of chaos and confusion but unmatchable energy and passion. And people love the chaos and confusion because deep down they know they are building something and making an impact.
8. Relatively easy access to capital even during bad market condition: You will always find great companies getting built during the bad market conditions. While, the money raising is never easy, it becomes even more difficult when the market conditions are bad. But for startup that are on the roll and going thru hyper growth and improving its fundamentals, they continue to get access to capital and at the same time many of their competitors run out of money.
9. Culture like cult: When are in the midst of making a startup that will eventually become a unicorn, you are also creating a strong culture and values for your startup as a founder. Sometime the culture and values are so strong that I will almost compare them to a cult. A startup with strong culture and values, can withstand all the ups and downs and can harness people and their potential far more effectively than a typical corporation or a multi national.
10. Your metrics are significantly better that others in same space: I remember first two years of making of ShopClues, our metrics for growth, conversion, CAC, COD, Cost per Visitor, Cost per Order, and unit economics was so different from any other E-Commerce companies that most VCs could not even believe that we were aso operating in E-Commerce. The fundamentals, cost advantage and other growth and tractions we had were probably 3 to 5 times better than any other E-Commerce company and that is why we made it to the Unicorn club with record low time and record low cost.
Sandeep Aggarwal is a serial entrepreneur, angel investor, internet visionary and philanthropist. He is widely regarded as the father of marketplaces in the Indian Internet ecosystem – having founded ShopClues (2011) – India’s first managed marketplace, which became 5th Unicorn in Consumer Internet in India & Droom (2014) – India’s first marketplace for automobiles. Sandeep is passionate about Digitizing India through mentoring startups, especially on entrepreneurship traits and skills.
Twitter: sandeepagg
