Download This PaperThe Unicorn Puzzle
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
74 Pages Posted: 24 Oct 2022 Last revised: 21 Nov 2022
There are 2 versions of this paper
The Unicorn Puzzle
The Unicorn Puzzle
Date Written: November 15, 2022
Abstract
From 2010 to 2021, 639 US VC-funded firms achieved unicorn status. We investigate why there are so many unicorns and why controlling shareholders give investors privileges to obtain unicorn status. We show that unicorns rely more than other VC-funded firms on organizational capital as well as network effects and the internet. Unicorn status enables startups to access new sources of capital. With this capital, they can invest more in organizational intangible assets with less expropriation risk than if they were public. As a result, they are more likely to capture the economies of scale that make their business model valuable.
Keywords: Unicorns, Scale and Scope, Venture Capital, Private vs. Public, Organizational Capital
JEL Classification: G24, G32, G34
Suggested Citation: Suggested Citation
Swiss Finance Institute
c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland
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