Studying the full taxonomy of startup, you wouldn’t be wrong to call it a zoo, as investors are fast to associate every class or group of the overabundant startups with animals.
Unicorn startups -which are firms worth $1 billion or more- being the most famous of all was coined by Aileen Lee, Chief Operating Officer of Cowboy ventures, in 2013.
In her article, Aileen Lee wrote about the 39 Unicorn Startups based in the U.S that started in 2003. At the time of her article, these rare companies formed about 0.07% of venture-backed consumer and enterprise software companies.
As of the time of this writeup, The total number of unicorn companies in the world according to CB insights is 1,157 valued at over $3824 billion when combined.
Individual unicorn valuations are not just sitting at a single numbered billion dollars any longer, as companies are boasting a valuation of $10 billion or more. Bytedance, for example, is worth $78 billion, just $24 billion away from being called a Hectocorn Startup.
Startups can be categorised based on valuation and capital efficiency, and one thing they have in common is their mythological terminologies.
Full Taxonomy of Startup based on Valuation
When categorising by valuation, you can choose between private and public valuations. With a multiple of ten, the terminology changes.
Hectocorn
These are corporations with a market capitalization of more than $100 billion. Companies like Apple, Google, Microsoft, Facebook, and Amazon fit into this group based on public valuations. Salesforce might have been one as well if they hadn’t gone public. These businesses are also referred to as “super unicorns” by Lee, but hectocorn is more grandiose.
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Decacorn
A peek at CB Insights’ list of billion-dollar firms reveals that there are quite a few worth more than $10 billion. Airbnb, SpaceX, and JUUL Labs, for example.
Oyo Rooms, Ripple, and fintech startup Nubank, for example, are companies that are just getting off the ground. These firms are uncommon, yet all it takes is a large funding round for a unicorn startup to become a reality.
Learn What Owning a Business has Done for Me and/ What it can do for You.
Unicorn
This goes without explanation: enterprises worth $1 billion or more, and CB Insights’s collation shows that there are 1,157 unicorn startups in the world. You can learn about unicorn startups and how to be one.
Learn- Scientific Grant Writing Tips for Startups–Key Mistakes and How to Avoid Them.
Soonicorn (Centaurs)
Soonicorns or Centaurs are companies with a market capitalization of at least $100 million (considered tiny by today’s standards). HReasily, Front, and Circles are examples of soonicorn startups.
Read- 4 Insightful Ways to Attract Angel Investors as a Startup in Nigeria.
Minicorn (Pony)
McClure termed it Pony, which describes a company having a valuation of at least US$10 million.
That describes the vast majority of 500 Startups Accelerator Program and YC alumni companies.
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Full Taxonomy of Startup based on capital efficiency
How would you classify capital efficiency? It all comes down to the size of the team, profit margins, burn rates, growth rates, and how much of a VC’s money can be returned.
| Taxonomy based on capital efficiency | Explanation |
| Dragon | Dragon startups are startups that can return a huge percentage of the fund Venture Capitalists invested in them. Uber is the one who gave Benchmark the entire fund back. John Backus and Hemant Bhardwaj, both at NAV.VC at the time of writing, coined the word. “Dragons are for bread, unicorns are for show,” as is popularly said. Dragons are even rarer than unicorns, according to research, and not all VCs can claim to have one in their portfolio. LinkedIn, Workday, and Twitter are some of the other dragons. |
| Pegasus | With this word, coined recently by Jason Calacanis, the lexicon becomes even more mythological. These are businesses that soar over numerous funding rounds, basically skipping them because they have incredible revenue and growth rates while employing a tiny, low-paid crew. Do such businesses exist? Yes, that includes Dyn.com and Calm, both of which have skipped many rounds of dilutive fundraising. According to Calcanis’ buddy Brian Alvey, Kickstarter may be one because they only raised $10 million in 2009. |
| Zebra | Is it possible to expand a business using a variety of finance options? Can these businesses succeed while addressing societal issues? In 2017, Mara Zepeda, the co-founder and CEO of Switchboard, created the term “zebras.” These businesses are “black and white”—They are both profitable and beneficial to society. When zebra companies band together, they are more powerful. They’re also long-lasting, capital-efficient, and have unrivalled endurance. Building such businesses is extremely difficult. |
| Rhinoceros | The rhino is frequently used as a derogatory phrase to represent businesses that pose as beautiful unicorns. However, Nick Nash of Asia Partners, a private equity firm, uses it as a positive phrase when referring to “modest, quiet, underrated firms” worth more than $1 billion. RedDoorz is Exhibit A. |
| Gazelle | The gazelle is a lean, leaping animal that moves quickly. In business terms, this means it’s a startup with rapid and profitable growth and a small team. Prof. Wong Poh Kam, director of the NUS Entrepreneurship Centre, coined the term in a study of Singapore’s startup scene. He desired that gazelle startups create jobs. |
| Cockroach | Not a term, but Paul Graham used it in April 2007 to describe startups that can withstand any crisis. These are startups that are “small, ugly, and indestructible.” |
| Zombie | If the gazelle startup generates employment, zombie startups do the opposite. Prof. Wong said that these are businesses that are thriving by grants or venture capital money, and they are “non-feasible firms” that simply divert resources away from more deserving entrepreneurs. |
How many types of startups are there?
There are five basic types of startups that cut across a variety of industries. We listed them all in this article. These five types of startups all have different approaches to scaling and operations.
Read- How to Write a Business Proposal for Investment as a Startup.
How do you design a startup?
There are typically 8 Steps and strategies to Create a Startup and they include:
- Problem/finding the problem
- Ideation stage and Solution/Validation stage.
- Find your dream and capable team to work with
- Create the customer persona & customer validation.
- Prototype & Validation
- Structuring the marketing plan & building a landing page for your startup
- Creating a business and revenue model
- Startup financing/sourcing of funds to finance your startup.
Conclusion
Instead of chasing unicorn status, it’s time to focus on becoming a fund-returning, profit-rich dragon. Hence, we have startups based on valuation and capital efficiency.
Important Takeaways
- Hectacorn, Decacorn, Unicorn, Soonicorn and Minicorn are classifications of startups based on valuation.
- Dragon, Pegasus, Zebra, Gazelle, Rhinoceros, Cockroach and Zombie are classifications of Startups based on capital efficiency.
- Dragons are very rare unicorn startups that can return a huge percentage, if not all, of the money invested in them.
