In Class, his rude and amusing 1983 guide to the American social hierarchy, the literary historian Paul Fussell noted the strange prominence of the unicorn in working-class culture. Stumped for an explanation, he surmised that it might have something to do with a “low Anglophilic snobbery,” a “pseudo-reference” to the royal coat of arms. Times have changed. Three decades later, the unicorn has jumped several rungs up the class ladder, to where it’s now the principal lust object of the tech and financial elite: a young company that has attracted enough financing to make it worth a billion or more.
“Unicorn” in this usage was coined by Aileen Lee, a veteran venture capitalist (VC) who’d just started her own firm, Cowboy Ventures. (Lee rarely gets credit for the coinage, which, given its ubiquity in a certain subculture, seems unfair. You have to wonder if it has something to do with her gender—women VCs are barely more plentiful than unicorns.) Lee and her colleagues had just completed a study of what makes start-ups successful, and wanted a catchy label for the winners. She thought “unicorn” fit the bill: “Yes we know the term ‘unicorn’ is not perfect—unicorns apparently don’t exist, and these companies do—but we like the term because to us, it means something extremely rare, and magical.”
In November 2013, when she published her findings at TechCrunch, a website/database/promoter that is a major nexus of the current mania, there were 39 unicorns extant. She now counts twice that many. Other sources number them at over 100. By her initial count, an average of four unicorns were born a year. That made them quite rare—just 0.07 percent of venture-backed software startups. The unicorn birthrate has accelerated dramatically: About as many have been born in the last two years as in the previous ten.
Lee’s original list included some pretty big names—Facebook (the “super-unicorn”), LinkedIn, Twitter, Groupon (it still lives, against all odds), Yelp, Pinterest, Uber, AirBnB, and so on. Most were headquartered in the Bay Area—though the center of the action had moved to San Francisco from Silicon Valley—but New York City was an up-and-comer. The founders were almost all men, most of them white.
The geography of the game has changed little, and the demography looks to have gotten somewhat more diverse, but the pursuit of the unicorn has accelerated vastly. It’s all gotten surreal. At the high end, the valuations have gone off the charts. As of late June, based on existing investments, AirBnB is valued at $24 billion, more than Marriott, which has over 4,000 hotels to its name. These valuations are figured this way: Investor X puts $100 million into startup Y in exchange for a 10 percent ownership stake. That means that Y is “worth” $1 billion. Of course, there’s no guarantee that anyone else would buy the remaining 90 percent for $900 million, but one can always dream. While the company is on track to lose $150 million this year, it’s projecting that it will be making $3 billion in 2020. Who knows? But investors wanna believe.