Although I've cautioned about not becoming a unicorn startup, that doesn't mean there's nothing to learn from them. A startup that surpasses $1 billion valuation has to be doing something right.
You may not be ready to live Russ Hanneman's Tres Commas lifestyle, but you can certainly implement strategies from some of the most successful startups around. Here are the tactics 8 unicorns used to grow their business beyond the third comma.
1. Uber Leveraged Existing Infrastructure
Uber's estimated value between $40 and $50 billion makes it one of the largest and fastest growing startups on the planet. It accomplished this by executing on an ingenious strategy: in each new city, the company hired a General Manager who approached existing black car services with an easy app to make money in their downtime.
By monetizing existing car services, Uber cleared a major hurdle for businesses that operate in a two-sided marketplace. The startup leveraged existing infrastructure to build supply and was able to focus on raising demand. As each city scaled, finding new drivers was easier because the brand was already known for offering top-quality services.
2. Dropbox Incentivized User Referrals
Dropbox is valued at an estimated $10 billion, despite spending very little on advertising. While a clean interface and stellar service definitely helped, CEO Drew Houston credits the company's referral program for increasing signups by 60%.
Friend referrals on Dropbox are made easy via email, social media, and web affiliate links, and the company provided incentive by giving both parties a 500MB increase in cloud storage for referral signups. This motivated users to spread the word about this unicorn at a time when it seemed like everybody was offering cloud storage services at a lower cost than any marketing platform offers.
3. SnapChat Targeted Teenagers
SnapChat is valued between $10 and $20 billion, after turning down multi-billion-dollar acquisition offers from both Facebook and Google. The social media platform appealed mostly to teens who wanted to hold conversations away from the prying eyes of their parents. In today's data-driven society, kids have grown up seeing the downside of public social media posts.
The startup's promise of temporary posts that could be sent to WiFi-enabled devices without a cellular data plan appealed to an entire generation seeking refuge from the always-watching public eye. With 6 billion video views per day, it's no wonder advertisers are salivating at the prospect of catching the eye of SnapChat Users.
4. DJI Made Technology Accessible
DJI is valued at an estimated $10 billion, accounting for 70% of the consumer drone market. While most drone companies focused on the military and commercial markets, DJI designed a consumer-friendly Phantom model that has either tripled or quadrupled sales every year between 2009 and 2014. In 2015, the company did over $1 billion in sales.
Public interest in drone rose when the media started reporting on their active use in the field by the military. When this unicorn released the Phantom, it became the iPhone of drones, with a sleek look and a simple controller that uses a smartphone for the screen. By making drones available to the consumer market first, DJI established a foothold in the industry that has yet to be matched.
5. Tanium Landed Big Accounts
Tanium is valued at an estimated $3.5 billion even though the company is largely unknown on the consumer market. After Target's 2013 data breach cost the company over $100 million in losses, the company was more than happy to sign up for the cybersecurity startup's services.
This unicorn gave IT departments centralized access to information in seconds that used to take days on networks connecting thousands of computers. Because of this efficiency, Tanium landed contracts with the U.S. Department of Defense, Nasdaq, Visa, Amazon, and more. These large accounts generated large revenue, attracting large investments at a time when interest in unicorns was flatlining.
6. Xiaomi Undercut Global Competitors
Xiaomi is valued at approximately $45 billion, and, although most westerners haven't heard of this Chinese company, Samsung and Apple certainly have. That's because the company is the 4th largest smartphone manufacturer in the world, ahead of HTC, LG, Lenovo-Motorola, and Microsoft.
The startup accomplished this feat by offering comparable smartphones for nearly half the price of its competitors. By selling quality electronics using mostly Internet channels, Xiaomi was able to reduce overhead and price its smartphones barely above cost. In doing so, it created a market in a crowded industry, becoming as iconic as the iPhone and Galaxy brands in China, India, and spreading to other countries.
7. Palantir Technologies Simplified Data Analysis
Palantir is valued at an estimated $20 billion after gaining contracts with government intelligence agencies and financial institutions. Founded by Peter Thiel and a group of other people who were involved with PayPal, the company's products focus on gathering and analyzing fragmented data to identify fraud and the criminals responsible.
The startup's technology helped convict Bernie Madoff and is rumored to have located Osama bin Laden. With that kind of proof of concept, it's a lot easier for Palantir to sell its natural language-based platform to other industries. With so much data being collected these days, every business needs a simplified way to analyze it, and this unicorn fills that need.
8. Spotify Used a Freemium Model
Spotify is valued at an estimated $8.5 billion, despite being a mostly free service. By bridging the gap between piracy and paid music, Spotify was able to build a large catalog of music while attracting 100 million users, 30 million of which pay for the service as of March 2016.
When the service launched in 2010, iTunes was business model to beat, as Apple had already made physical disks all but obsolete. Spotify didn't charge per track, but it also negotiated deals with record companies to make as much commercial music available as possible. Because of this, users were drawn to the service en masse, making this startup a major player in the music industry.
Conclusion
Although you're statistically unlikely to become the next unicorn startup, there's valuable information that can be learned from existing unicorns. Integrating the growth hacking strategies of these companies may not push your company's valuation to $1 billion, but it'll certainly grow it beyond where it's at right now.
What do you think? Is aiming for unicorn status a worthy objective for your startup?