The Unicorn Puzzle

70 Pages Posted: 24 Oct 2022 Last revised: 16 Feb 2023

See all articles by Daria Davydova

Daria Davydova

École Polytechnique Fédérale de Lausanne

Rüdiger Fahlenbrach

École Polytechnique Fédérale de Lausanne; Swiss Finance Institute; European Corporate Governance Institute (ECGI)

Leandro Sanz

Ohio State University (OSU) - Department of Finance

René M. Stulz

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: February 13, 2023

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.

Keywords: Unicorns, Scale and Scope, Venture Capital, Private vs. Public, Organizational Capital

JEL Classification: G24, G32, G34

Suggested Citation

Davydova, Daria and Fahlenbrach, Rüdiger and Sanz, Leandro and Stulz, Rene M., The Unicorn Puzzle (February 13, 2023). Fisher College of Business Working Paper No. 2022-03-012, Charles A. Dice Center Working Paper No. 2022-12, Swiss Finance Institute Research Paper No. 22-80, European Corporate Governance Institute – Finance Working Paper No. 857/2022, Available at SSRN: https://ssrn.com/abstract=4255165 or http://dx.doi.org/10.2139/ssrn.4255165

Daria Davydova

École Polytechnique Fédérale de Lausanne

Quartier UNIL-Dorigny, Bâtiment Extranef, # 211
40, Bd du Pont-d'Arve
CH-1015 Lausanne, CH-6900
Switzerland

Rüdiger Fahlenbrach

École Polytechnique Fédérale de Lausanne ( email )

Quartier UNIL-Dorigny
Extranef 211
1015 Lausanne, CH-1015
Switzerland
++41-21-693-0098 (Phone)
++41-21-693-3010 (Fax)

HOME PAGE: http://https://www.epfl.ch/labs/sfi-rf/

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Leandro Sanz

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

Rene M. Stulz (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

HOME PAGE: http://www.cob.ohio-state.edu/fin/faculty/stulz

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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