That’s how Anand Sanwal, CEO/co-founder of venture data provider CB Insights, titled his recent talk to the Cornell Entrepreneurship Summit. IMR invited him to elaborate in this edited email exchange:
IMR: You call companies with billion-dollar private-market valuations unicorns. What does that mean?
Sanwal: Billion dollar companies are a rare beast, if I can torture the unicorn analogy a bit more. And as a result, the unicorn moniker has been used to describe companies who’ve gotten to that elusive billion dollar valuation threshold.
IMR: How rare has CB Insights research found them to be?
Sanwal: They remain relatively rare but there has definitely been an uptick recently. A lot of money has been entering the private markets and as a result, more companies are getting these billion dollar valuations. In the first 9 months of 2014, our data found 20 new companies were added to the billion dollar club alone. That brings the total number of unicorns we’ve counted to 83 globally.
IMR: What are the most important actions an entrepreneur can take to increase the chances of becoming a unicorn?
Sanwal: Setting out with the goal of building a unicorn would seem like a surefire way to fail. The unicorn companies seem to share three important factors: strong management teams, a large market and momentum, which means they are growing fast. They are able to do this because they are solving real problems. The number 1 reason startups fail is building products the market does not want. Unicorns clearly avoid that.
IMR: How do entrepreneurs build products the market DOES want? Is there any one approach that stands out?
Sanwal: As a result of tracking companies that have succeeded, it is, as mentioned, about them solving real problems. And so often, these companies are built by people who have domain experience in a particular industry or who spent a lot of time talking to or understanding user behavior and needs and built a product in response to that problem. They’ve generally avoided the “build a product looking for a problem” issues that afflicts many companies.