When venture capitalist Aileen Lee coined the term “unicorn” in the fall of 2013 to describe a VC-backed company valued at $1 billion or more, it was a fitting description of an exceptionally rare phenomenon, with around 40 companies in the world holding such title. While unicorn status is still rare, the tech market boom of 2014 - 2017 made unicorn companies more commonplace.
The number of unicorns nearly quadrupled to an all-time high of 175, and despite a more tepid tech market in the months and years since the boom, today the number of billion-dollar start-ups remains near the record high at 150 thanks to many of the companies choosing to delay initial public offerings. One byproduct of this state of affairs has been prolonged periods during which many funds have been unsure of how to mark their holdings of unicorn securities. It is inherently difficult to value an early-stage company, especially when that company derives its value from unique and disruptive technologies. Unfortunately, the difficulty is not an abstract issue, because when the number of unicorns has increased, determining their values correctly became commensurately more important, particularly to the Securities and Exchange Commission (“SEC”).
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