Why dragons are replacing unicorns at the top of startup valuations

There are now about 800 unicorns, meaning privately held startups valued at $1 billion or higher. Unicorns are no longer rare or mythical, so a new word has been devised for startups with even more impressive valuations. The moniker of “dragon” now describes this new breed of high-value startups. 

The unicorn universe

At the time when venture capitalist Aileen Lee dubbed the term “unicorn” in 2013, she was conveying the rarity and alchemy of ultra-successful startups. There were only 0.07% or 39 venture-backed startups (all U.S.-based software companies) that reached the coveted unicorn valuation of over $1 billion within a decade or less. 

The definition of the “unicorn startup” has remained exactly the same since, but the number of unicorns has increased manifold. In 2015, the number of startups with a $1 billion valuation spiked to 80. Of late, the number of unicorn startups has truly ballooned. There has been a flurry of startups whose valuations have been hugely inflated by investment. By September 2021, the number of unicorns had topped 800, per CB Insights, with a cumulative valuation of around $2.6 trillion.

The rarity that Lee’s term “unicorn” emphasized seems to have faded away in the current venture capital investment environment.

Dragon club

The new word for high-value startups is “dragon,” which is an even bigger behemoth than the unicorn. Dragons are more aggressive companies, and the pace at which they raise capital is remarkable. 

For instance, in August 2020, American aerospace manufacturer SpaceX raised an insane $1.9 billion in the largest funding round to date, landing it in the dragon club with a post-money valuation of $46 billion. Enterprise software firm Databricks secured a whopping $1.6 billion funding round in August 2021 to reach a $38 billion post-money valuation.

Eligibility: To qualify as a dragon, a startup must be valued at $12 billion or more, net of venture funding. This may sound like an arbitrary figure, but it reflects more than 10 times the growth of unicorns and illustrates the rapid-fire increase of private funding.

By the numbers: At the time of publication, there are 19 global startups that qualify as dragons. Nine are based in the U.S.

The U.S. dragons are: Chime, Databricks, Epic Games, Instacart, Fanatics, Plaid, Rivian, Stripe and SpaceX.

No doubt, dragon is an even more exclusive and aspirational club than venture capitalist Lee’s original framing, where achieving the $1 billion dollar mark was the height of success. But the new cachet is to be a dragon that reaches a $12 billion valuation. 

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