In the venture capital industry, just picking winners is a losing strategy. The goal is to pick blockbusters, companies that can scale from a team of founders in a garage to a multi-billion-dollar IPO in less than a decade. History has shown that it’s primarily these outlying performers that create returns for venture investors, so top-performing fund managers focus on companies that have a shot at growing to this size.
History has also shown that such companies have been extremely rare. To capture that rarity in a single word, Aileen Lee, founder of a seed-stage investment fund called Cowboy Ventures, coined the term “unicorn” in a 2013 Tech Crunch article.
A herd of unicorns is a natural consequence of the new world we inhabit, a sign of a healthy, productive ecosystem at work.