Unicorns & Business?? Exploring the Magic of Venture Capital

The truth hurts. 

When I was younger, I was faced with the harshest truth: unicorns weren’t real. My 5-year-old self couldn’t—and frankly refused to—accept this reality. Now, 12 years later, I’ve discovered I was right all along—unicorns do exist after all.

Let me explain…

Before a company goes public and into the market, a venture capital firm may invest in its business. Venture capital firms are buy-side institutions that include angel investors (don’t worry about the fancy terms—we’ll explain everything soon!). These investors all come together to invest in companies that they believe have a strong growth potential. In order to do so, companies need a selling business pitch, and organized business plan, and much more to steal the hearts of these investors. 

When comparing VCs (venture capitalists) to banks, they are essentially the opposite when lending out money. VCs specialize in high-risk lending with strong return rates, a common reason why many of these firms go out of business quickly. In return of a huge investment, VCs typically receive their return rates in the form of equity. When a VC takes on an investment that ends up being worth over a billion dollars, they are called a unicorn. Some common examples of unicorns include SpaceX, Instacart, Epic Games, and Databricks. 

When a company is doing really well, VCs often sell their equity as shares when the company goes public. This is formally called an exit as they are no longer part of the company nor invest in it. 

So, it turns out unicorns do exist—but they’re found in the world of business, not fantasy. Who knows? You may just encounter—or even create—the next unicorn.