Understanding unicorn companies

Unicorn companies are extremely sought-after by investors and founders due to their rare combination of fast growth and disruptive innovation potential. This article explores the meaning, instances, and typical characteristics of unicorn companies, shedding light on their significance within the entrepreneurial ecosystem.

Understanding Unicorn Companies: the Journey to a $1 Billion Valuation for Start-ups

Being a unicorn company is akin to winning a gold medal at the Olympics or having your band’s music album certified platinum. For entrepreneurs, it signifies reaching the top of their field, a feat that many aspire to but few accomplish. While attaining unicorn status is no small feat, an increasing number of start-ups are reaching this milestone. Therefore, it’s valuable to explore the journey they undertake to attain such status and the significance it holds in the entrepreneurial landscape.

What defines a unicorn company?

In essence, a unicorn company must meet two criteria: Firstly, it must be privately owned. Secondly, its valuation must surpass $1 billion. These entities are labeled as “unicorns” due to their historical rarity. To attain such a status, a start-up must effectively cater to a market need, garnering substantial interest from investors.

Nevertheless, in recent years, we’ve witnessed a proliferation of unicorn companies. For entrepreneurs, achieving unicorn status has transitioned from a rare feat to an ambitious objective. While undeniably challenging—it is within reach of capable founding teams.

Origin of the term “Unicorn Company”

Let’s delve into the intriguing origin of the term “unicorn company.” Isn’t it curious how such a whimsical term has become so popular amongst entrepreneurial lexicon? Well, the credit goes to Aileen Lee, a savvy venture capitalist. In a stroke of brilliance, back in 2013, she sifted through a staggering 60,000 tech start-ups. Amidst this sea of hopefuls, she unearthed a mere 39 gems that boasted valuations exceeding the coveted $1 billion mark. This realisation prompted her to label these entities as “unicorns,” effectively distinguishing them as the crème de la crème of entrepreneurial triumphs.

What factors contribute to the valuation of a unicorn company?

Given that unicorn companies are in their early stages, still in the process of establishing revenue streams and attracting customers, their valuation operates under a different framework compared to established enterprises. Unlike scrutinising annual reports to gauge company worth based on yearly revenue, with unicorns, valuation hinges on investor perception.

For instance, if an investor acquires a 20% equity stake in a start-up for $200 million, it implies that the investor believes the start-up holds a value of $1 billion. However, it’s crucial to grasp that this valuation is primarily theoretical. Take ByteDance, the Chinese conglomerate behind TikTok, as an example. Despite having raised “only” $13.1 billion in venture capital, its valuation stands at a staggering $360 billion. Therefore, when discussing unicorn companies, we’re typically referring to their “post-money value,” not the actual capital injected into the start-up.

10 Unicorn Companies Founded in Australia

Atlassian – software company that develops products for software developers and project managers among other groups.

Canva – an online design suite that lets you create visually appealing, shareable content.

Airwallex – a fintech platform that combines an international payments network, a worldwide trade finance platform, and digital currency asset trading for the financial ecosystem.

Immutable Systems – provides a groundbreaking new approach to cloud security.

G01 – enables businesses to grow their workforce through on-demand training and a dynamic content-driven platform.

Safety Culture – the operational heartbeat of working teams worldwide.

Culture Amp – an employee analytics platform that focuses on staff surveys and analytics.

Judo Bank – a unique player in the financial industry, providing specialized services to small and medium-sized businesses. Their lending method is based on cutting-edge technology, but what distinguishes them from other digital lenders is their human touch. Judo knows the issues that SMEs encounter and tailors its services to each company’s requirements.

LinkTree – at the forefront of improving the digital experience for both content developers and end users. Linktree is a straightforward and adaptable platform that allows users to streamline their online presence by linking to all important content in one easy-to-access spot

Pet Circle – an online business that sells a variety of pet goods to meet your animal friend’s requirements. From food and medication to toys and treats, our unique online store has everything a pet owner requires to guarantee their pet’s health. 

Are you ready to advance your project? Speak with our professionals right now to get the knowledge and direction you need to be successful!
Our team of seasoned startup specialists is here to assist you with strategy, advice, or practical support. Don’t put off scheduling a consultation any longer; talk to the startup accounting experts at Fullstack about how we can help you realise your dream.

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Stuart Reynolds is the founder of Fullstack Advisory, an award-winning accounting firm for businesses leading the future. He is a 3rd generation accountant who specialises in tech & online companies.

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