BOSTON—NOVEMBER 9, 2023—The number of unicorns – start-up businesses with $1 billion valuations – has mushroomed from 39 when the term ‘unicorn’ was first coined a decade ago, to almost 2,500 companies founded in the past 20 years, Bain & Company research shows. Yet despite the proliferation in unicorns’ numbers, under 1% of these businesses generate $1 billion or more in revenues and cash, a truer measure of sustainable success, a new Bain study, Herd on the Street: So Many Unicorns, So Little Cash, reveals.

In an analysis that challenges the focus by founders and investors on the milestone of $1 billion company valuations and unicorn status, Bain’s breakdown maps the universe of unicorns for the first time. It finds that start-ups that have also achieved the critical thresholds of success of $1 billion of annual revenues as well as the same amount in annual cash flow, validating their business models, are exceedingly rare.

Of some 225,000 companies founded during the past 20 years, only around 2,500 have achieved $1 billion market valuations (including public and private businesses). But from these, fewer than 250 have crossed the $1 billion threshold. And just 15 companies generate more than $1 billion in cash and revenues – a tiny subset of unicorns that have transformed their marketplaces.

The 15 established and scale insurgent businesses that have achieved this status make up just 0.7% of the total number of unicorns. Yet collectively these businesses represent $2.3 trillion in market value, with each telling its own amazing story of innovation and scaling-up. These companies include Tesla, Meta, JD.com, Li Auto, Meituan, Pinduoduo, Sunshine Insurance, Vipshop, and Xiaomi, each with revenues of more than $10 billion and cash generation of $1 billion plus, as well as Airbnb, BioNTech, Daqo New Energy, Jazz Pharmaceuticals, Palo Alto Networks, and ServiceNow, each also having achieved $1 billion in revenues and cash generation alongside $1 billion-plus valuations.

Bain’s analysis argues that the rarity of exceptional start-up businesses that grow beyond an initial vision that they might disrupt markets to go on to build and scale powerful business models, with profound impact on their industries, has important implications in the current, changing environment for venture capital fund-raising.

With tighter financial conditions amid rising interest rates, and scarcer venture capital, the analysis suggests that founders looking to raise funding in coming years, as well as those building ‘Engine 2’ businesses within existing major companies, will increasingly have to focus much more closely on real revenues and cash generation.

“As we enter this next generation of business building, founders seeking to raise venture capital – as well as those building businesses within corporates – need to move beyond the business world’s fascination with market value,” said Dunigan O’Keeffe, partner at Bain & Company and global head of the firm’s Strategy practice. “Founders that truly change the game have two priorities at the outset. They are focused on rapidly scaling a powerful customer franchise and building a cash generative business that can sustain itself. That is, they are concentrating energy and effort on what success really looks like. As our 15 insurgents have demonstrated, if all of that’s in place, valuation will follow.”

Urgency for emerging insurgents that could still be contenders

Bain’s study also identifies a further class of ‘emerging insurgent’ businesses: companies that have crossed the $1 billion in valuation and revenues but have yet to generate $1 billion in cash flow (at least as publicly disclosed).  Of 206 public companies that Bain classes as ‘emerging insurgents’ it finds that some, such as Uber, could vault the $1 billion cash flow threshold soon thanks to impressive business momentum. But Bain also finds that many others have failed to move fast enough to build sustainable businesses.

While Meta took just 7 years of business to get to $1 billion in cash flow, and Tesla, as a more capital-intensive business, took 15 years, Bain notes that more than half of the ‘emerging insurgents’ it analyzed have yet to clear this hurdle.

“Speed is a natural advantage for young companies,” said O’Keeffe. “For these companies that are emerging insurgent businesses, there’s now tremendous urgency to use this edge to refine their business models for cash flow generation.”

The winning formula for scale insurgency

With the 15 unicorns Bain’s analysis identifies as having cleared the three hurdles of $1 billion market valuation, revenues and cash generation having cleared those thresholds within 10 years of their launch, on average, the study finds four common themes supporting their success:

• Platforms: Five of the companies are consumer platforms in China (JD.com, Pinduoduo, Meituan, Vipshop, and Xiaomi), and three are US-based platform leaders in social media (Meta), hospitality (Airbnb), and cybersecurity (Palo Alto Networks).
• Sustainability: Three of the companies have seized the opportunity presented by the energy transition through solar (Daqo New Energy), electric vehicles (Li Auto), or both (Tesla).
• Biotechnology: Two companies are leaders in discrete areas of biopharmaceuticals: BioNTech and Jazz Pharmaceuticals.
• Global poles of innovation: China (eight companies) and the US (five) dominate the list. BioNTech and Jazz Pharmaceuticals are the sole European-headquartered companies on the list.

Media contacts

To arrange an interview or for any questions, please contact:

Katie Ware (New York) — Email: katie.ware@bain.com

Gary Duncan (London) — Email: gary.duncan@bain.com

Ann Lee (Singapore) — Email: ann.lee@bain.com