Startup unicorn is a business term that is being discussed in various circles of society. This term is used to discuss startup companies, new companies that are starting to develop, and already have a relatively large financial scale. Yes, even though it is still a startup, a unicorn company is a business entity that allows it to continue to grow and absorb a lot of labor. Well, does Friend KH also have a startup company? And are you familiar with the term startup unicorn including its characteristics or criteria, and examples in Indonesia? In order to understand more, let’s see the explanation below!
What is a Unicorn Startup?
A unicorn is a business entity, especially in the form of a Limited Liability Company (PT), that has reached a nominal valuation of US$1 billion or around Rp14 trillion. Generally, this term is used for startups in the field of internet-based technology and information, such as application development, payment services, or transportation. The origin of the term unicorn refers to a rare mythological animal in the form of a horned horse. The animal is the same as a startup company that has reached a valuation of up to US$1 billion, which is very high considering they are still in the development stage. The valuation itself is the economic value of a company, where later if there are parties who want to acquire it, they must pay that value. Thus, a unicorn startup is a business entity with fantastic value.
How are Unicorns Different from Decacorns and Hectocorns?
Besides unicorn, there are other terms in the venture capital industry that divide startups into several categories according to their valuation, namely decacorn and hectocorn.
Decacorn
The term is derived from the Greek “deca” meaning 10 and added with the suffix “corn” from the word unicorn. Startups that fall into the decacorn category are startups that have 10 times the wealth of unicorn startups, that is, their valuation value is above US$10 billion.
Hectocorn
Hecto also uses the Greek “hecto” which means 100. Startups that fall into the hectocorn category are startups that have a valuation above US$100 billion. In the world, companies in the hectocorn category include Apple, Microsoft, Facebook, Oracle, and Cisco.
What are the Criteria or Characteristics of Unicorn Startups?
By now, you should understand what a unicorn startup is, as well as how it differs from decacorn and hectocorn. However, apart from the difference in valuation value, you need to know that there are several other characteristics that unicorn startups usually have. The characteristics of unicorn startups are as follows:
Innovation
The main characteristic of a startup or unicorn company is business innovation. We can see this in Gojek. Initially, we did not recognize ojek, shuttle, or online food ordering services. But thanks to the emergence of the startup, a large company in the transportation sector emerged.
Focus on Customer Service
The services provided by unicorn startups are B2C (Business to Customer), which is a business strategy that focuses on broad customer affordability. An example is Spotify, which develops free and legal in-app music services.
Developing Technology
A feature that is also certain in almost all unicorn startups is the development of technology that allows us to access various facilities in one application. For example, Gojek, which provides shuttle services, food orders, delivery of goods, with various payment methods.
Private Ownership
One of the reasons why a startup can grow rapidly to become a unicorn is because it is privately owned. As such, the business is more responsive and quick to make investment-related decisions that increase its valuation.
Examples of Unicorn Startups in Indonesia
The development of startup companies is quite significant in Indonesia. According to CB Insights, by 2022, there will be six startups that will be named as Indonesian unicorn companies. Some time ago, maybe KH pals recognized examples of unicorn companies, namely Gojek and Tokopedia. Not anymore. Why? Because Gojek and Tokopedia have merged into GoTo in May 2021. According to data from Reuters, GoTo’s valuation has reached US$32 billion as of October 26, 2021. Thus, the combined company has entered the decacorn category with a valuation of more than US$10 billion. Here are some examples of Indonesian unicorn companies, namely:
Traveloka
Traveloka was founded in 2012 and became a unicorn company in 2017. The company is engaged in hotel and travel bookings. Currently, Traveloka’s valuation reaches US$3 billion or equivalent to Rp42.6 trillion.
J&T Express
Founded on August 20, 2015, J&T Express became a unicorn company in 2021. The expedition startup has a valuation of IDR 301.7 trillion with investors including Hillhouse Capital Management, Boyu Capital, and Sequoia Capital China.
OVO
OVO is an Indonesian unicorn company with a valuation of US$2.9 billion. Currently, OVO is the largest fintech company in Indonesia with investors including Grab, Tokopedia, and Tokyo Century Corporation.
Xendit
Fintech startup Xendit entered the ranks of unicorns in September 2021 with a valuation of US$1 billion. Xendit was founded in 2015 and provides payment system services to facilitate business transaction processes ranging from MSMEs, startups, e-commerce, to large companies.
What are the Tips for a Startup to Become a Unicorn?
Well, of course, KH Friend also wants it not, that the company or startup that you will establish or are currently running can be included in the ranks of unicorn startups like the company examples above? It is not easy for startup companies to pay attention to the number and nominal transactions, the number of application users or customers, product technology, team quality, and continue to innovate to compete with competitors. Therefore, if business actors succeed in maximizing this, more investors will be interested in providing funding and the valuation figure will increase. Yes, the valuation of unicorn companies is generally based on how investors and venture capitalists feel the startup will grow and develop, of course in the long run. But don’t worry, the valuation has nothing to do with the startup’s financial situation. As a matter of fact, many of them rarely turn a profit the first time around. To be sure, as a startup owner, KH Buddy needs to prepare several things so that investors are more confident in providing funding to your company, including:
Make sure your business is in the form of a PT
Why does it have to be a PT? Because PT is the only business entity in the form of a legal entity and all of its capital is divided into shares, making it more credible and easier for investors to invest their capital. In return for the funds provided, investors will get shares in your startup company with a percentage of ownership equal to the funds provided.
Create a Founders Agreement
Usually, startups are founded by more than one business person. For this reason, it is necessary to make a founders agreement that is agreed upon by all the founding parties of the startup business. Founders agreement is a cooperation agreement between founders that aims to run a business or company. This agreement is made by all founders of the company before starting to run the business.
Register your Intellectual Property Rights
If you want to get an injection of funds from investors, the thing that should not be overlooked is to take into account the protection of Intellectual Property. This is to prevent theft of innovations, works or creations of business people in the future. Intellectual Property can take various forms, ranging from copyrights, brands, patents, industrial designs, geographical indications, and so on.
Have a Shareholders Agreement
Shareholders agreement is very important to further regulate the authority of each shareholder, including investors.
READ ALSO: Here are the Legal Documents and Costs to Establish a Startup!
A shareholder agreement is also one of the documents that investors usually require or request when looking to invest in your startup company.
Corporate Tax Compliance
So, why do business or corporate tax matters affect investor interest? Because tax is one of the legal issues related to the company’s reputation and its compliance with government regulations.
KH Contact
Well, if you are currently starting a startup company and want to immediately get investors to achieve the title of unicorn, then take the time to know the various provisions of legal legality, yes! Starting from ensuring the formation of a PT legal entity to making contracts or agreements that can protect your business. To make it easier, you can contact Kontrak Hukum. We provide startup establishment services including the required legality documents such as Deed, SK, NIB, OSS, and NPWP, which you can access on the KH Services – Startup Establishment page. Not only that, we also provide various investor engagement services that can help grow your startup smoothly and safely. For more information, visit our KH Services – Contracts page. If you have any questions about startups or other business entities, feel free to consult with us for free at Ask KH or via direct message (DM) to Instagram @kontrakhukum.
