Unicorn

A unicorn is a private company, one that has not listed sharesTermStock×السهمA share of ownership in a company, bought and sold on a stock exchange, that may pay dividends and rise or fall in value.Open the term on a public exchange, that has reached a valuation of a billion dollars or more. The valuation comes from a private funding roundTermSeries A/B/C funding×جولات التمويلSuccessive rounds of investment in a startup, each labeled by letter and typically larger than the last, where investors buy a stake in the company.Open the term led by investors such as venture capitalTermVenture capital×رأس المال المخاطرMoney invested in early-stage companies with high growth potential in exchange for an ownership stake, betting on companies that may fail.Open the term funds, not from a share price anyone can look up.

The name was coined to describe how rare the achievement was at the time, in the way a unicorn is rare. It is a label used by the industry about itself. It carries no legal or regulatory meaning, and no authority awards it.

Because the number in the headline is not a measurement. It is a multiplication. If investors pay a hundred million dollars for a tenth of a company, the company is described as a billion dollar company. Nobody valued the other nine tenths, and nobody offered to buy them at that price.

What those investors bought is also not what everyone else holds. Late-stage money usually comes with priority on repayment: in a sale, it comes out first, often at a guaranteed multiple, before ordinary shares receive anything. So a company can sell for less than its headline valuation, return the full amount to its last investors, and leave the holders of ordinary shares and staff share options with nothing. The valuation is real for one class of shareholder and notional for the rest, and the press release quotes the number as though it were one figure.

For anyone on the outside, the label matters mostly because of when the company becomes reachable. Private shares are closed to ordinary investors, so the first chance to buy is the public listing, and that listing is priced against the last private round. The entry price therefore already contains every earlier investor's gain, and the company arrives on the market having to grow into a number it was handed while nobody could check it.

• A billion dollar valuation says nothing about profit. Many unicorns spend more than they earn and depend on the next funding round to keep operating.
• Private shares are restricted. Buying in before a listing is generally limited to accredited investors and to employees who receive shares as pay.
• Repayment priority means ordinary shares and staff options can be worth nothing in a sale that pays the investors in full.
• A private valuation is a price agreed between two parties in one transaction. A public market re-prices it continuously, and often far below.
• Because the threshold is a round number in dollars, the label is used as much for marketing and recruitment as it is in any financial sense.