Unicorns: who and what are they? Since you’re reading this on a UX strategy and content marketing website, surely a ‘unicorn’ strikes as something more than just a horned stallion straight out of a fable; and you’re also probably wondering if there are any such unicorns in Malaysia.
Spoiler alert: there’s only been 1 (one) company that can be considered a Unicorn in Malaysia. That company is Carsome. Before we get too ahead of ourselves, let’s first define what a Unicorn is, what it means to be one and what it takes for a company to achieve this seemingly mythical status.
Definition of Unicorn
Let’s begin by demystifying (or perhaps de-fantasising) the ‘unicorn’ term as it relates to investment. Contrary to the imaginings of 5 year old princesses, Unicorns are actually extraordinary private companies that have achieved a valuation of $1 billion or more. Rare, and perhaps that’s where the term Unicorn comes from.
These are the disruptors, innovators and game-changers that captures the business world’s attention with their ingenuity and sheer might.
Who are Venture Capitalists (VCs)
Unicorns are able to reach this valuation due to the backing of investors, typically in the form of venture capitalists (VCs). VCs contribute large sums of investment to startups that they deem have great potential during the pre-seed and seed stages to facilitate growth, followed by subsequent rounds of investing that eventually propels said startups to potentially reach unicorn-level valuation.
Thus, VCs such as Gobi Partners played a massive role in making Carsome the only unicorn in Malaysia. But what makes these startups stand-out from the rest to capture the attention (and wallets) of these VCs?
Why Being a Unicorn Matters & What it
Takes to Be One
You may think that a non-unicorn company can be just as prosperous and successful in their respective areas, which is true. To go against that logic is to paint the entire business landscape unhappy because, as stated earlier, there’s technically only been 1 unicorn company in Malaysia to date.
Rather, achieving the unicorn status is sort of a seal of approval, albeit of the highest prestige. Being a unicorn in Malaysia — or the rest of the world for that matter — signals that this company possesses resilience, vision and ability to make an indelible mark in its industry.
On a more symbolic note, it’s the embodiment of resolute intent and groundbreaking ideas. Like an actor receiving an Oscar’s or a musician their Grammy, the unicorn status evokes a similar prestige awarded for visionary acumen — except it won’t collect dust on a shelf in an LA mansion.
Now that you’re familiar with its definition and why it matters to have a ‘unicorn in Malaysia’ status, let’s now look at qualities a startup should have to have a horse in the unicorn race.
1. Technology-driven
According to Hubspot’s 2023 Global Unicorn Report which can be accessed here, the Information Technology (IT) sector contains the largest population of unicorns, eclipsing other established sectors like Consumer Products & Services (B2C).
Therefore, technology is clearly at the core of unicorn success. But why?
Due to the digitalisation of damn near anything and everything, there are virtually boundless market opportunities and gaps to fill from the physical to digital transition alone. Unicorns leverage cutting-edge tech and data-driven insights to make informed decisions, carving an unventured niche for themselves.
Another reason why IT and tech-driven sectors are flourishing is because they’re much more likely to offer products that work at scale.
Many of the largest tech unicorns are able to scale to growing operational demands due to the absence of physical inventory and the adoption of a software-as-a-service (SaaS) approach to create and deliver goods and services.
To be a unicorn in Malaysia, a local company must be in the position where they can operate with minimal operating costs and negligible responsibilities related to storing or managing inventory that require minimal resources or infrastructure for rapid growth.
Scalability in this context allows for profitability and is thusly highly valued among VCs, especially now that VCs are inclined towards positive cash flow and profitability.
This tech-driven approach helps startups to optimize operations to scale, target markets effectively, and stay ahead of the competition.
2. Disruptive Ideas that Solve Real Problems
Successful unicorns don’t just chase trends; they identify and solve significant problems. Their products or services disrupt industries, offering innovative solutions that make life easier, better, or more efficient
You almost certainly need disruptive ideas to be a unicorn in Malaysia, gearing your ideas towards solving real problems while breaking new ground simultaneously, setting the bedrock of your startup.
For example, OpenAI is set to be valued at $100 billion, making it the second-most valuable startup in the US right behind SpaceX. This is because OpenAI has solved generations-long productivity issues (real problem) thanks to the advent of their large language model brainchild ChatGPT (the solution).
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3. Have A Solid Business Plan
As impressive as your tech and products may be, your startup won’t come close to reaching unicorn status without an airtight business plan.
This ties into the fact that most of your startup’s valuation comes from investment; a VC worth their salt won’t be investing large sums or if any at all in startups that don’t have a solid business plan. Looking at the sole unicorn in Malaysia, Carsome’s business plan was so solid that Gobi Partners can’t help but become overwhelmed with confidence to contribute as much money into them as they did.
In short, a solid and concise business plan outlines your startup’s prospective growth 5, 10, 20 years from today.
Here’re some criteria a VC would consider for a prospective unicorn in Malaysia:
A) Compelling Value Proposition
A clear and compelling value proposition that addresses a significant market need can capture the attention of VCs. They seek startups with innovative solutions that stand out in the market.
B) Large Total Addressable Market
Demonstrating a sizable and growing total addressable market (TAM) is attractive to VCs. They want to invest in startups with the potential for significant market penetration and revenue generation.
C) Scalability
VCs look for businesses that can scale rapidly. A scalable business model, supported by efficient processes and technology, signals the potential for substantial growth and return on investment.
D) Clear Monetisation Strategy:
A well-defined and viable monetisation strategy is essential. Before VCs determine the next unicorn in Malaysia with their wallet, they’ll want to understand how the startup plans to generate revenue and achieve profitability over the long term.
E) Experienced and Committed Team:
The expertise and commitment of the founding team are crucial. It’s found that 75% of VCs prefer startups with 2 or more founders.
VCs invest not only in ideas but also in the capability of the team to navigate challenges and drive the company forward. A great team is able to turn a bad idea into an okay one, and is able to take a good idea to a great one.
F) Proven Traction and Milestones:
Evidence of traction such as user adoption or revenue growth instills confidence in VCs. Achieving milestones showcases the startup’s ability to execute its strategy successfully.
E) Strategic Partnerships:
Partnerships with established companies or industry leaders can enhance a startup’s credibility. VCs may see these partnerships as a sign of validation and potential for further growth.
Challenges Faced by Startups to become a
Unicorn in Malaysia
As we’ve learnt so far, entering the realm of unicorns isn’t a mere stroke of fortune; it’s a strategic journey marked by specific criteria that define the pinnacle of business success.
Behind the scenes of every success story are the challenges that mold resilience and fortitude. In the Malaysian context, companies striving for unicorn status encounter a distinctive set of obstacles.
Navigating the regulatory landscape, for instance, demands agility and adaptability. Attracting substantial funding emerges as another pivotal challenge, with entrepreneurs vying for the attention and support of investors.
Additionally, competing in the global arena demands a unique set of strategies as Malaysian companies seek recognition beyond national borders.
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