How does a company reach Unicorn status?
In 2013 in the world of finance, venture capitalist, Aileen Lee called new companies valued at over one billion dollars unicorns. To build a billion-dollar company from scratch is an incredibly difficult feat.
Only 0.05% of startups succeed in raising venture capital. In 2018 year, CB Insights reported that the odds of becoming a unicorn was less than 1 percent for companies that had raised venture capital.
For every 200,000 startups… only 1 unicorn appears.
Rarely does an individual have the opportunity to be involved with 2 unicorns.
In 2000 the author of this publication “Idea to IPO”, Alex Paine, founded Smartsalary now known as Smartgroup Ltd which today has a capital value of $1.6 billion.
In 1998 Alex was a Director of RPC and associated with the founding of RPC Plan Managers which later merged with Computershare. Today, it has a capital value of $8.5 billion.
In other ventures, Alex was the co-creator of the idea that became the world’s first laptop computer, the Dulmont Magnum, the Founder of PBI Benefit Solution Pty Ltd, a fintech company that formed a joint venture with one of Australia’s largest banks and the author of numerous business publications.
The experiences gained in this journey has led to the creation of “Idea to IPO” and its associated templates and tools for the benefit of everyone that wants to build a successful business.
Few companies reach Unicorn status without going through an Initial Public Offering (IPO) where the business is listed on a public stock exchange and the incoming investors effectively establish the value of the company by purchasing shares.
(Initial Public Offering)
When a company reaches a certain size, continued growth requires a serious injection of capital: too much even for Venture Capitalists (VCs) to contribute. It’s here that some companies will consider an Initial Public Offering, and transform into an organisation that anyone can invest in.
Often called a stock market launch in practical terms, this means transforming from a privately held company into a public one, selling a portion of shares to institutional investors (like banks, insurers and hedge funds) who then make the shares available for purchase on the public stock exchange.
Pros and Cons of an Initial Public Offering
|Massive funding potential. Big angel and VC investments can net a growing start-up millions of dollars in investment – but an IPO can raise billions.||It’s expensive. The average cost of an IPO is
$3.7 million, and with a whole plethora of regulatory commitments to adhere to.
|Liquidity. IPOs often make it possible for founders and other investors to sell their shares. As well as rewarding the start-up’s long-standing investors, this helps free up liquid capital for the company to spend in other areas of growth.||Loss of control. Public companies often have thousands of shareholders, each with voting rights. Performance needs to be reported, each and every quarter, and poor performance will need to be answered for.|
|Attract talent. Raising an IPO also makes it possible to offer stock options as incentive for top talent.||It’s a different job. Running a public company is a very different job to the one most start-up founders sign-on for.|