189. How to build a unicorn in 2024Feb 07, 2024
10 years ago Silicon Valley venture capitalist Aileen Lee coined the term "unicorn" to describe a young company valued at over $1 billion.
Back in 2013, there were just 39 unicorns in the US, and Lee's team researched what they did and who ran them. This list informed much of how we thought of successful tech start-ups.
The updated unicorn list has just come out and the differences are startling.
There are now 523 companies on the unicorn list (a 14x increase!).
Listen to this episode to learn:
- What most unicorn companies do today and who runs them
- Why there are more non-technical founders running unicorns than ever before
- What this change means for the tech ecosystem
- How to make the most of it for founders, investors and the professionals services firms who work with them
Resources mentioned in this episode:
- Cowboy Ventures: Welcome Back to the Unicorn Club, 10 Years Later
- Tech for Non-Techies podcast: 142. From dentist to tech founder
Take the course:
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Hello smart people!
How are you today?
I have been absolutely obsessed with Griselda on Netflix. In fact, I’m surprised I’ve torn myself away from it to record this podcast episode. I feel quite heroic!
In other exciting, and far more relevant news, Aileen Lee has updated the unicorn list and that’s what we’re talking about today! In this episode, we will cover the most important points from her research, and what they mean for founders, investors and professionals who support the tech ecosystem, like lawyers and bankers.
I’ve pasted the link to her entire research in the show notes, so you can dive deeper if you want to.
Aileen Lee is a renowned venture capitalist in Silicon Valley. She used to work at Kleiner Perkins, and then she set up her own VC fund called Cowboy Ventures. In her latest funding round, she raised $95 million her fund, she has invested in lots of companies, but the most famous one is probably the Dollar Shave Club.
Pretty cool, ha?
It was Aileen Lee who coined the term “unicorn” to describe U.S.-based companies valued at over $1 billion despite being less than a decade old. She told TechCrunch that
'We wanted the term to feel special because it's rare, almost magical to build a unicorn company'
Since then, the term “unicorn” has spread globally, so it no longer refers to just US companies.
But let’s go back to 2013 - 10 years ago, Aileen Lee researched the unicorns in the US. She wanted to find out what the companies did, who the founders were, and whether there were any patterns.
And this is important because the companies on that list have really defined what we see as tech success. Back then, there were 39 unicorns in the US in total. The vast majority (around 80%) were consumer facing companies like Uber, Pinterest and Facebook, and most were led by technical founders.
There were literally no female founders in unicorn founding teams.
This was the era of the tech bro: 33% of unicorn founders in 2013 went to Stanford, and most of them had technical degrees.
This meant that investors were willing to fund Stanford computer science grads, pretty much no matter what.
I have seen it with my own eyes. I know several young Stanford dropouts who got millions of dollars in funding for an idea, which they spectacularly failed to execute, because they had no experience in being adults.
Having said that, most unicorn founders back then were in their late thirties when they started their companies, and this is pretty much the same today. So, the college drop-out turned billionaire story is very rare.
In general, you need life and business experience to create a successful company. So, if you’re sitting there and feeling sorry for yourself because “you’ve let life go by” this is not true, and I have the data to prove it. So let’s get with it. The time is now.
And now let’s look at what we have in today’s unicorn list.
Well, now there are 523 unicorns on the list, 14 times more than 10 years ago. This is massive massive growth! 78% of today’s unicorns are enterprise companies, which is directly opposite to what it was 10 years ago. On the first list, remember, the vast majority were consumer facing companies. Today, it’s mostly B2B.
And, here’s what I find so exciting - I’m going to quote directly from the research:
About 40% of co-founders are ‘non-technical.’ 60% majored in a STEAM field; ~25% business, 15% humanities, a big change.
Back In 2013, 90% of CEOs had technical degrees. This bucks the “founders must be technical” stereotype.
And according to People Data Labs, just a third of founders previously held software engineering roles.”
And now, let’s dissect this change and see what it means.
Firstly, I believe there is a correlation between the rise of enterprise software companies and non-technical founders.
A B2C company like Uber or Doordash grows through digital advertising, and mostly these apps get new users by advertising on Facebook. Virality is a myth. Do not believe it. If you want to have a successful consumer facing app business, you are spending a lot of money on Facebook ads.
Now I have done both: Facebook advertising and enterprise sales. I’ve done both for both of my companies: Enty, my retail tech business and for Tech for Non-Techies.
I can tell you that enterprise sales is a very very different skillset from digital marketing.
Enterprise sales is relationship sales. You have to meet your target customers, talk to them, listen to what’s on their minds and then offer a tailored solution to solve their problem. You really get to know your corporate clients, and they get to know you. It is very personal, very human.
B2C is Facebook marketing, which is a very metric driven approach. You don’t even have to interact with humans that much. You get a creative person to make the actual ad (the image or the video), you program Facebook to target your market, and then you insert dollars. You track your campaign and it’s a very data driven thing. You see where people are clicking, so you add more money to that ad, and you remove marketing spend from groups that aren’t biting.
So sum up: enterprise sales is very human, digital marketing is very computerised.
Deeply technical people are typically not going as good at relationship building, as their non-technical counterparts, and which is why we see this correlation of enterprise software and non-technical founders.
And now let’s move on to the investors and financing.
Somebody is funding these unicorns ran by non-technical founders. Those somebodies are writing large cheques! This means that the investor mindset has already changed at the very highest levels towards non-technical founders.
This attitude is yet to trickle down everywhere though. For example, I spoke to the head of an angel investment in London literally just last year, and he proudly told me that the angel investment network he runs doesn’t let non-technical founders pitch.
Well, the top VCs in Silicon Valley are doing it, and they are making billions of dollars, so maybe it’s time to shift that policy, if you want to make money.
For the investors listening to this: do not discount opportunities just because a start-up isn’t ran by an engineer. Your competitors aren’t, and some of them are going to get great ROI.
Now for the founders listening to this.
There has never been a better time to be a non-technical founder. I have been smelling this change in the market for years (which is why I set up Tech for Non-Techies) and now I have the data to prove it. I am literally going around everywhere and saying “I told you so” right now and it feels excellent.
So, if you have an idea for a tech business, but not the skills to built it, do not look at developers turned CEOs like Mark Zuckerburg and get discouraged. Look at the unicorn list and get encouraged.
And in celebration of this amazing piece of news, I have made the Tech for Non-Technical Founders course available to buy on demand. It has been only available in the membership, but now you can get it separately at techfornontechies.co/courses
So what are you waiting for? Make 2024 the year that you make this happen.
And now, let’s dive into what this change means for the tech ecosystem, and the people who support it, like the bankers and the lawyers.
There will be more opportunity for you as more people enter the market.
Now non-technical founders have a real fighting chance, and so do technical founders. There is more room for innovation.
This means more people will start companies and raise money and need your services! And to capture this opportunity, you need to be the advisors who understand your clients better than your competitors do. The more you understand how your clients’ business operates, the better you can serve them. So learn to speak tech, learn how to ask them the right questions and understand their concerns. This is how you build long term client relationships.
Also, your clients are going to look different to what you might hold as a stereotype. Instead of a young tech bro in a hoodie, you might be faced with a sensible looking business person in their forties, who uses technology to solve a business problem.
In there research, there is also really interesting data on where founders have worked before, so listen up.
Many founders have previously worked in tech (but aren’t necessarily technical). Also, most unicorn founders have had some sort of entrepreneurial experience, which might not look relevant at first glance. But it matters.
I’ll show you what I mean, because I’ve seen the same thing too amongst my students who have been most likely to succeed as non-technical founders. Most of them have already created a business.
For example, one of my students is a wonderful woman called Dr Marilyn Sandor. She is a dentist who created a Telehealth company. Dr Sandor was already running a dental practice, so she knew about marketing, sales, hiring, cashflow management and so on.
She needed to add tech knowledge to her existing knowledge as a business woman. Yes, this took some work, but this wasn’t a huge hill to climb, especially because I was her teacher and the Tech for Non-Technical Founders course is super clear and easy to understand. And that’s what I’ve made available for you to buy too.
By the way, I interviewed Marilyn on this podcast, and she shared her journey as a non-technical founder. It is 142. From dentist to tech founder and I highly recommend that you listen to it if you have entrepreneurial plans. I’ve linked it in the show notes.
When I see a banker or a management consultant with an MBA and a tech idea, I honestly get worried. They often underestimate how hard entrepreneurship is, even before you add the tech aspect to it.
So, if this is you, start a side hustle today. Even if you don’t need the money, create something out of nothing and sell it. Learn to manage start-up cashflow. Learn to get customers without the fancy Goldman Sachs or McKinsey brand behind you. This experience will set you up for success down the line.
And finally, let’s end today’s lesson on a super duper high note.
The opportunity in front of us is huge, no matter what part you want to play in the tech ecosystem. Listen to this.
Less than 10% of today’s Fortune 500 companies are considered to be tech companies. I know it might feel like tech companies are everywhere, but they are actually a small proportion of the market. This means that you and I are still at the beginning of the tech revolution. Digital transformation is still in its early stages.
There is still so much opportunity ahead of us. I think it’s so exciting!
So, learn to speak tech today, learn what developers do, grasp the basics of AI and understand how an app goes from idea to a live existing thing. This is how you set yourself up for success in the decades to come.
Just by listening to this podcast, you are taking a proactive approach to educating yourself, and taking your future in your hands.
So well done for investing in yourself today, and for every other time that you have listened to this podcast. You are making a smart and long term investment in your future and I am really proud of you.
If this podcast inspired you to start your own venture, because there is literally no better time to be a non-technical founder, then the Tech for Non-Technical Founders course is exactly what you need.
The link is in the show notes, or just go to techfornontechies.co/courses and see all the information there. People have used it to create tech businesses as non-technical founders, to transition into careers in tech investing and to be sought after start-up advisors.
So if you also want these results, check out the Tech for Non-Technical Founders course.
And on that note, have a wonderful day, and I shall be back in your delightful smart ears next week.
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