Building a unicorn company is the dream of most entrepreneurs yet it remains incredibly challenging. According to figures from CB Insights, the odds of becoming a unicorn are less than one per cent for companies that raised venture capital (and are thus deemed to be among the most investable start-ups).
Today there are around 310 unicorn companies (private firms valued at $1 billion+) in the world yet 49% of them are in the US and 30% are in China. These countries do not have a monopoly on brilliant ideas, hard work and innovation so it begs the question, are unicorns born or are they created?
When we think of unicorn companies we often do so with visions of dynamic entrepreneurs who act as global figureheads for their business and industry: think Elon Musk, Jeff Bezos, Travis Kalanick, Adam Neumann, Mark Zuckerberg, Jack Ma, Steve Jobs, Bill Gates – every generation has its iconic entrepreneurs who created a unicorn. Often these entrepreneurial business leaders are seen as leading disruption in their sector, creating new business models or entirely new markets with their bold ideas. But is their innovation the whole story for their success?
Creating a business worth $1 billion+ requires significant teamwork, funding, mentoring and support from customers, suppliers as well as other advisors. Once a business has moved beyond start-up stage, they are firmly embedded in scale-up territory – they are no longer the product of just one or two people.
That fact lies at the heart of why the US and China lead the world in the creation of unicorns (and why we see tech businesses clustering around areas such as Silicon Valley, Shanghai, London, Berlin and Tel Aviv). These areas are ecosystems that draw in entrepreneurs and provide a platform for scaling up great ideas into great businesses. So the unicorn isn’t born, it is created through the collective effort of teams of highly knowledgeable people who all have different roles to play.
To build a great business you need a great idea, you need great marketing, you need finance injected at the right time and in the right way, you need mentoring and you need a pool of talent to draw on, as well as a group of people who can mentor the business and its leaders as they grow.
No unicorn operates in a vacuum, the ecosystem is key to its success.
The seed for that success is often a combination of existing technology businesses, universities and funding. These three groups combine to nurture and grow unicorns. But it also needs something else, the X factor. That X factor is a disruptive mindset.
Yet disruption can also be created. It is easy to mock the concept of sand-pits, hackathons, scale-up conferences and networking events, but most successful entrepreneurs that I have worked with will have stories of the defining moment when they had a ‘chance’ encounter with someone who introduced a new idea, a new approach or a totally new market into their thinking and as a result changed the course of their journey.
Take the file hosting service Dropbox, for example, which is now worth almost $12 billion. Drew Houston – the original founder – was given just two weeks to find a partner or else his backers threatened to pull out. The thinking of his investors was that new companies are more likely to succeed if they have more than one founder, whatever the connection between them may be.
While on the lookout for a partner, it took Houston a mere two-hour meeting to convince someone – who was just a “friend of a friend” at the time – to drop out of MIT and join him. Arash Ferdowsi and Drew Houston are now worth a combined $4.5 billion.
The success of Dropbox is testament to the power of collaboration. At the Innovation Hub we believe that success is most often achieved when the same vision is approached from different angles. Collaboration with a – possibly initially unsuspecting! – partner can in fact lead to the most successful creations.
So if unicorns are created rather than born what are the key lessons that we can draw on that help businesses scale-up consistently to achieve their goals? I think there are 4 key lessons:
Don’t innovate in a bubble: Seek advice, drawn on the lessons of others, network continuously and be generous with your own time. Unicorns need an ecosystem and you need to be embedded in that disruptive mindset
Seek mentoring as well as money: Funding alone won’t create a unicorn. Seek VC and financial backers who can also share advice, lessons and contacts that help take the business to the next stage – money alone will not deliver that
Focus on the core offering: Don’t be tempted to diversify too quickly. The advice that it takes a lifetime to build a reputation and a minute to lose it remains sacrosanct. Focus on the core strategy, deliver what you promise and have clarity of strategy and message that informs the experience and service you offer
Know when to step aside: Founding a business is deeply personal but it doesn’t mean that you will always be the right person to lead it. As the business scales-up you need to take on the talent that will take it to the next stage. In many cases brilliant innovators and entrepreneurs won’t be the right person to lead a large business – stepping aside or taking a different role can sometimes free the entrepreneur and the business, and your stake will continue to grow with the business, so there’s a significant upside.
The fourth point is the most challenging and contentious for founders of businesses and it explains why most unicorns will have fractured at some point, with some of the founders leaving amid acrimonious boardroom splits and negative headlines. If you think of the world’s biggest start-up firms they have almost all experienced change in the management team as they have scaled-up. The famous founders are generally the survivors from a larger start-up team who were transitioned to new roles or left the business as it accelerated through its growth phases. What unites most of them is they all made money through the process.
It’s also not just about the top of the business but also the bottom – bringing in talented people who will continue to challenge and innovate and drive the organisation to the next phase. So building a culture that allows people to shine and innovate at all levels is key.
So if you can take a pragmatic view, understand what value you bring to the business and what your personal goal is, then the chances are that the business will scale-up more effectively and attract the talent it needs to grow through all its development phases.
Read the original article in The UK Newspaper.