What are unicorn companies?

First it was Cornershop, now NotCo also managed to enter the club of startups whose value exceeds 1.000 million dollars. What in business jargon is known as a “unicorn” and Chile already has two. ¿What are unicorn companies?, we explain it to you in Hispanic Entrepreneurs.

But first, why is the term unicorn used and what does this mean for both Chilean companies? To understand it, you have to go back to 2013 when Aileen Lee, a venture investor, used it for the first time.

Lee spoke of the "Unicorn Club" to refer to startups that reach values ​​of billions of dollars. At that time only a few companies qualified as such and at the top of the list was Facebook. By going public, Mark Zuckerberg's company was no longer considered a unicorn.

Cornershop and NotCo are young companies that have received investments that have led them to exceed US $ 1.000 billion. The first is valued at 3.000 million and now FoodTech reached 1.500 million.

What are unicorn companies?

Unicorn companies are those that reach or exceed the value of $ 1.000 billion in their early years. Aileen Lee specifies that she achieves this during the early capital-raising and unlisted stages.

They are companies that grow fast and adapt to the needs of the market, achieving a great impact. In addition, they are based on technology and take advantage of the new needs that arise from these advances.

Unicorn companies are characterized by being innovative, scalable and with powerful marketing strategies that take advantage of technology.

These emerging companies are born with a low investment and resort to crowdfunding and seed capital to obtain financing. On the other hand, they may not have assets, not even cash flow for the first few years; however, the impact they have is remarkable and they manage to make a profit.

Business models of unicorn companies

The main business models in which unicorn companies thrive include:

• Ecommerce. The purchase and sale of goods and products through the internet. A clear example is Mercado Libre, which was born in Argentina and soon spread to all of Latin America.
• Fintech. They are companies that offer financial services applying new technologies. For example, Nubank from Brazil.
• Enterprise Software. It refers to the development of programs that facilitate the management of companies, as well as the fulfillment of tasks within an organization.
• Collaborative economy. This model is based on the cooperation of several users who exchange goods and services within a platform; for example, the model applied by Airbandb.

What does a company need to be considered a unicorn?

There are several examples of unicorn companies in Latin America, thanks to the fact that the conditions for it are being given. In Chile, NotCo became the second to achieve this denomination.

But what are the characteristics of these companies? We can summarize them this way:

• They have been on the market for less than 10 years.
• Their commercial value is above 1.000 billion dollars and they are privately financed.
• They are not publicly traded.
• They are innovative companies that offer solutions to needs in a novel way, implementing technology.
• They grow fast and are scalable, looking to expand in a short time.

Unicorn companies in Chile: NotCo case

In previous posts we explained how Cornershop became the first unicorn in Chile. A short time later, foodtecht NotCo also achieved this qualification, demonstrating the potential that the country has for the development of startups.

NotCo is a Chilean company that was founded in 2016 by Matías Muchnick (current CEO), Karim Pichara (doctor in Computing) and Pablo Zamora (doctor in Biotechnology). Produces plant-based foods in order to reduce the impact generated by the consumption of animals.

For the development of his products, Pichara created the Giuseppe algorithm, his artificial intelligence chef.

What the algorithm does is "find combinations of plants in order to replicate animal products and make them more sustainable and richer," they point out on their website.

Giuseppe uses machine learning technology to develop the products.

Today it has a presence in four countries in addition to Chile: Argentina, Brazil, the United States and Colombia. In addition, it plans to continue expanding throughout the region, including to other continents.

During the last round of financing it received 235 million dollars. A round in which the Tiger Global fund and sports personalities such as Roger Federer and Lewis Hamilton participated.

On previous occasions, it had already attracted the attention of Jeff Bezos, who at the time invested US $ 30 million. Other investors have been Enlightened Hospitality Investments, Future Positive and LCatterton.

With the new investments received, they aspire to improve the algorithm so that the production process is faster. As well as specifying the expansion plans.

To understand what unicorn companies are, you can analyze each of the examples we mentioned. These startups are expanding faster as their models are able to generate more trust.

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