Definition
A unicorn is a privately held startup valued at $1 billion (about 1.3 trillion won) or more. It hasn't gone public on the stock market yet, but its original idea and technology have already earned it a huge valuation.
Why name them after a mythical animal?
What are the odds of running into a real unicorn with a horn? Pretty much zero. When a U.S. venture investor first used the term in 2013, a startup reaching a $1 billion valuation within 10 years seemed just as unlikely.
Traditionally, a company needed decades of building factories and selling products to be worth that much. But the internet and smartphones changed everything. A startup with original software or a great platform could pull in users around the world almost overnight, creating a miracle of lightning-fast growth.
So the unicorn became the symbol for startups that win astronomical valuations before they even sell shares on the stock market (go public).
How can a company be worth $1 billion outside the stock market?
The most important rule for a unicorn is that it must be a private company that hasn't gone public. With no stock price trading every day, how can anyone put a $1 billion price tag on it?
The secret is in venture capital deals. Say a startup gets a $10 million investment from an investment firm and gives up a 1% stake in return. Do the math backward, and 100% of the company is worth $1 billion. Professional investors bet big money on the company's future growth, and that sets its official price tag.
Once a string of big investments pushes that valuation past $1 billion, the company is called a unicorn. No official body hands out the title. Research firms simply track these companies and publish lists. Even if a company isn't making big money today, its potential to dominate a market someday can earn it an enormous valuation.
To be more precise: decacorns and the reality check
To be more precise, the word unicorn reflects expectations about future potential, not current profit. Many unicorns spend years losing huge amounts of money so they can take over a market quickly.
That means if investor enthusiasm cools or the market turns, a company's value can be cut in half overnight, or it can even shut down. The shiny unicorn label is not a guarantee of stable success.
As tech companies keep getting bigger, new names have appeared. A startup worth more than $10 billion (about 13 trillion won) is called a decacorn, using the prefix deca- for 10 times the unicorn mark. One worth more than $100 billion (about 130 trillion won) is called a hectocorn, using hecto- for 100 times.
Common misconceptions
A unicorn company is a profitable business that earns huge sums every year.
A unicorn is a company with a valuation of $1 billion or more, not one that is making a profit right now. In fact, many of them run big losses to fuel fast growth.
Famous big companies listed on the stock market also count as unicorns.
Being private is a must for a unicorn. The moment a company goes public with an IPO and sells shares to everyday investors, it graduates from the unicorn list.
Where you meet it
Coupang, often called Korea's Amazon, was one of Korea's best-known unicorns before listing in the U.S. in 2021. Toss (Viva Republica), Musinsa, and Yanolja have also been counted among Korea's top private unicorns.
Airbnb and Uber were world-famous unicorn startups before they went public.
In one sentence
A unicorn is a startup that has passed a $1 billion valuation before listing on the stock market, a growth story that seems almost magical.