What can we learn from the success stories of unicorns like Uber, Spotify, and AirBnb?
- They disrupted major industries with enormous market shares that translated to massive user numbers
- They crafted memorable founding stories that captured the imagination of investors
- They were most often the product of experienced founders in their mid-30s
- They took seven years on average to go public or become acquired
While there is no one-size-fits-all blueprint for achieving a billion-dollar valuation, we can learn a lot from studying tech companies who have already achieved this important milestone.
Are you ready to take your tech startup to the next level in 2018? To start, consider what these top tech luminaries plan to accomplish this year and use their insight to keep thinking big, playing smart, and working tirelessly in pursuit of your goals:
Billion Dollar Tech Companies to Watch
How did Uber reach unicorn status?
- They had an original idea that tapped into a large market segment
- They were profitable from day one
- They tested product-market fit within a small segment before expanding
- They partnered with top investors who understand their vision
With a valuation of nearly $70 billion, Uber is the most valuable private technology firm in the United States today. In six years, the ride-sharing platform went from burgeoning San Francisco startup to unicorn powerhouse, serving individuals in 58 countries and more than 450 cities worldwide.
Although many smart decisions contributed to Uber's success, the one that stands out the most is a keen understanding of target audience. Co-founders Travis Kalanick and Garrett Camp fine-tuned Uber's product-market fit in San Francisco because they suspected the local tech community would be supportive. At the time, San Francisco's taxicab market just didn't compare to other international cities. In fact, many of the city's affluent professionals preferred to ride the rail.
Uber marketed to their ideal customers by hosting tech events and providing attendees with free rides. The marketing tactic worked, and word quickly spread about the city's newest taxicab alternative. The startup called RocketSpace home during 2011, while they worked on expanding outside of San Francisco to NYC and Paris. By December 2011, Uber had closed a $32 million Series B and begun expanding internationally.
Why they are worth watching:
Despite reaching the pinnacle of tech success, Uber weathered a string of highly-publicized controversies in 2017. Last June, co-founder Travis Kalanick stepped down as the company's CEO after an investigation into company culture. It will be interesting to see how the world's largest taxi service rebounds in 2018.
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How did Spotify reach unicorn status?
- They outperformed existing players on music catalogue, features, pricing model, and user choice
- They created a freemium model that disrupted the status quo
- They ran a huge U.S. launch campaign
- They struck an exclusive deal with Facebook to become their “default music service"
- They kept overhead expenses low
After the failure of Napster, who could have predicted the success of Spotify? The music streaming platform has amassed 140 million monthly active users and 60 million paying subscribers to date. In just six years, the company reached a billion-dollar valuation thanks to a series of smart choices. Today, Spotify is a deca-corn valued at ten billion dollars.
In 2005, Co-founders Martin Lorentzon and Daniel Ek noticed a huge gap in the commercial music model. Cash-strapped consumers no longer wanted to purchase entire albums, but existing options were limited: music listeners could either pay per track, utilize a service like Pandora, or pirate music. The company launched a freemium business model to address this gap in 2008.
Thanks to buzz driven by an invite-only launch strategy, and an exclusive deal to become Facebook's default music service, it didn't take Spotify long to disrupt the entire music industry.
The startup called RocketSpace home from 2012-2013. During that time, Spotify launched in the United States and raised Series D, E, and F funding worth $450 million.
Why they are worth watching:
According to the Wall Street Journal, Spotify recently filed with the Securities and Exchange Commission to list its shares on the New York Stock Exchange through a direct listing. Should the move prove to be successful, other tech startup giants may follow suit.
Why did AirBnB reach unicorn status?
- They found innovative solutions to common startup problems
- They developed a clever integration with Craigslist, allowing them to test product-market fit
- They utilized on the ground "street teams" to break into new international locations
- They presented themselves as offering more than "just lodging," but destination experiences
- They paid meticulous attention to customer acquisition costs
AirBnB is used by more than 150 million users in 191 countries and is showing no signs of slowing down. The rental sharing platform has come a long way since its inception in 2008. What started out as a way for duo designers Brian Chesky and Joe Gebbia to make some extra cash — by renting out air mattresses on the floor of their San Francisco apartment — has grown into a 31 billion dollar business.
During the early years, you would have found the startup in a San Francisco coworking space. Today, AirBnB boasts its own headquarters, complete with a War Room (inspired by the movie Dr. Strangelove), a President’s Room (inspired the 1917 executive quarters), and a variety of other themed meeting rooms modeled after some of the site's most unique listings.
Though many factors contributed to the company's success, one of the most important appears to be wise money management. For example, many startups assume Facebook ads offer a better ROI than physically sending sales representatives into new markets. However, AirBnB found their cost of acquisition was five times better with teams on the ground. After kickstarting these markets with a human presence, the new markets also continued to grow twice as quickly.
Why they are worth watching:
AirBnb raised a one billion dollar funding round in March 2017 and is a candidate for IPO. The tech startup recently confirmed two acquisitions: Tilt, a payments startup that allows users to split bills more easily; and Luxury Retreats, a company that manages vacation homes. It will be interesting to see how AirBnB further expands its services in the hospitality vertical.
The Path to Unicorn Status
Less than two percent of startups ever reach unicorn status, but the ones that do have much in common. No matter your end goal, conserving cash flow and meeting the right people are two of the most important ingredients for startup success.
RocketSpace helps entrepreneurs on both fronts. We provide Seed to Series C funded tech startups with flexible lease terms, warm introductions, and a curated ecosystem of tech resources. Since opening our doors in 2011, we have helped launch 18 alumni with valuations greater than a million dollars.
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