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The Unicorn Puzzle

Author

Listed:
  • Daria Davydova
  • Rüdiger Fahlenbrach
  • Leandro Sanz
  • René M. Stulz

Abstract

From 2010 to 2021, 639 US VC-funded firms achieved unicorn status. We investigate why there are so many unicorns and why founders grant investors privileges to obtain unicorn status. Unicorns rely more than other VC-funded startups on organizational capital and network effects. Unicorn status enables startups to access new sources of capital, and growth in available funding causes the number of unicorns to increase. As a result, unicorns can stay private longer, which enables them to grow their organizational intangible assets with less expropriation risk and better capture the economies of scale on which their business model relies.

Suggested Citation

  • Daria Davydova & Rüdiger Fahlenbrach & Leandro Sanz & René M. Stulz, 2022. "The Unicorn Puzzle," NBER Working Papers 30604, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30604
    Note: CF
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    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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