We’re focusing on unicorn startups today, defining what makes a startup worth more than $100 million in 2020. As times change, so does business, markets, startups, and investors. Let’s see what key aspects drive startup valuation above the first hundred million in today’s business world.
Like we said, we first need to be very clear that $100 million used to be a large figure for startups at some point. But what’s known as a “mega-round” around the valley is no longer such large-scale fundraising, anymore; especially not when it comes to tech companies.
In ideal terms, a company would raise at least the same amount as it seeks to end up making towards its exit. So, to be able to sell above $100 million, a company would’ve ideally raised an initial round of funding of at least half that much.
The above explains why it’s so important to choose investors with a keen eye from a company’s very beginning.
Also, consider that a startup valuation of the $100 million range generally takes place during Series B or C of funding. This means a VC will typically need to chip in about $10-$30 million for the 100 million mark to be possible. This is where having a key investor helps more than a handful of small investments.
In fact, the valuation of a startup will be based on whatever the startup and investor(s) agree should be the main goal during initial funding discussions.
As usual, achieving financial objectives for a company will largely depend on market behavior. It will also depend on whether the best has been made of the opportunities that arise in the process, and how much toll the startup must take of whatever risks have threatened the company.
All in all, however, bear in mind that a $100 million valuation is best achieved with strategic funding, especially during a company’s initial stages.
When we ask what makes a startup worth more than $100 million, we need to consider a few key facts that need to work in alignment with solid performance for a company to reach those levels. A startup that reaches this kind of valuation, and has all it takes to back it up, has not only had a potent product or service offer, but also considerable sales with a well-performing sales strategy.
Typically, startups at this stage have not only spread more than a single product across diverse markets, but their sales strategy is certainly aimed at scaling.
For sales to boost as we describe above, a great working team comprised of different roles needs to be “kicking it”, day in and out.
The above translates into a team that’s aimed at production, technical if need be, along with peeps well in charge of product management, in keeping the company’s vision aligned with running strategies and, above all, great leadership.
The operational aspects of a company that’s worth more than $100 million necessarily rely on a balanced state of all its legal, financial and staffing needs. Throw a solid set of their own tech into the mix or even intellectual property rights, where this applies.
With set budgets and measured expenses, it’s for certain that the leadership of the startup has also done a valuable job at keeping headed in the best direction with all considerations in check.
Don’t think a valuation above $100 million is the win-it-all success, either. As with everything, there are multiple sides to every consideration.
Aaron Patzer, the founder of a financial management tool called Mint, lived this out in his own flesh. He, unfortunately, gave birth to a saying that doesn’t reflect the best of unicorn startup lights. As such, “pulling a Patzer” is now an expression used to describe a startup that sold out way too early in the game, at way too low a figure.
Brutal as it sounds, and even though walking out with a $170,000 sale on his startup could’ve been seen as a great outcome to a starting company during his time, the acquisition for this value isn’t much of a hype, anymore. The common claim is Patzer could’ve indeed held out for longer to make way more than he gave up for hastily taking the first big offer at hand.
This should make us wonder if we’ll be ready to jump the gun at the first possibility of an exit or whether we’ll rest and trust scaling for even more profitable returns to be our move.
In general, what makes a new business worth more than $100 million comes from a set of business decisions handled right along with the right risk versus opportunity conditions working to the company’s overall favor.
Fortunately, great leadership is a skill that can be developed endlessly. And putting the perfect team together to run a startup should also be a conscious step of getting any company started. This is why having the most suitable team for your startup is so important when learning how to create a pitch deck for investors, for example.
Along with a great business idea, investors need to see you have a superb team who’ll know how to drive your company through thick and thin to profitable success.
We continually stress how you need to do strenuous market research, and research in general. There are tons of very valid reasons for that. And managing a perfect product-market fit, for example, is a part of that. This aspect is highly relevant to a company’s overall success, and it’s one of the toughest areas to get right.
Even though product management is a rough one to dominate, it should definitely be on any entrepreneurs list of areas to handle well.
Also, bear in mind that a startup capable of setting on a revolution in a largely sized industry, or even more so one able to generate a new trending market altogether, can definitely be worth large sums.
It doesn’t just take a great business idea to create a successful startup, but it’s certainly one of the reasons why some unicorns might’ve scaled quickly in the past, as well.
One thing is sure: These unicorns probably had to make dozens of startup presentations to raise capital. If you ever want to become one and save some time while at it, give Slidebean a try or ask about our presentation design services.