New startups are created each day, but only a few will become a unicorn, the term used to describe a privately held startup that reaches an evaluation of over billion. What makes those precious few stand out?
At VivaTech 2025, three venture capitalist experts discussed the key markers to identify startups that will grow into unicorns. Hussein Kanji, Founder of Hoxton Ventures, brings the Silicon Valley mindset to Europe with his UK Based company. Ilya Strebulaev, Director of Venture Capital Initiative at Stanford Business School, is shaping the future of venture capital from classrooms to boardrooms. Amiel Kornel, Founding Partner of Venture Craft Studio, aims to help startups grow sustainably and establish resilient innovation.
How Rare Are Unicorns?
According to Strebulaev, about one in one hundred venture backed startups will become unicorns, so while rare they aren’t quite as mythical as one might expect. Kanji had a slightly different view on the rarity of unicorns; he pointed out in his first fund three of the seventeen investments went public at unicorn valuation. He believes the venture capital industry rests on the best of the best, so averages can be misleading.
To become a unicorn, you have to be good, to become a venture investor you have to be good, so looking at the average is just noise.
While not everyone can be a unicorn, the panel agreed that studying them is important for everyone. Seeing what companies succeed, or just as importantly, fail, provides crucial information to all founders.
How to Spot a Future Unicorn
What are venture capitalists looking for to find unicorns? Kanji and Strebulaev agreed that unicorns must have extremely quick growth. Strebulaev said the research shows that, “Companies that become unicorns become unicorns in three and a half years on average.” This rapid growth is a key indicator investors should consider when deciding which startups to back.
Venture capitalists if they see a company that has been trying to raise money for several years, statistically they should not pay attention to this company.
Raising a lot of money at the start is crucial but not the only factor. Once the first round is secured, rapid growth is necessary, and growth requires more money. Kanji noted it becomes very circular, “The companies that raise capital fast are then able to spend the capital very fast, which enables them to grow.” This is achieved by constantly being in funding mode; unicorn companies in the United States average 6.7 rounds of funding at about 11 months apart.
While unicorns are raising money and doing several rounds of funding, they do not need to try to make as much as possible. Instead, Strebulaev recommended defining a budget and then adding a 50-100% buffer as a funding goal.
Potential Pitfalls
Money and rapid growth are the foundation of a unicorn, but it can also be the downfall. Kornel warns,
Raising too much money too fast can lead to erosion of good governance and smart decision making and ultimately lay the seeds of the failure of that company.
Strebulaev commented on the tradeoff, having too much funding can make you diluted as a founder or lose some control but not enough means you will run out of cash to continue. They also discussed the difficulty of finding the balance of funding enough in the short term to keep the doors open, while also growing at scale and setting yourself up for long-term success.
Challenges in the European Market
The panelists also touched on the additional challenges that European startups face in comparison to American counterparts. While Europe is home to 30% more AI engineers than the United States only 10% of unicorns are from Europe. Strebulaev believes this is caused by two major factors, the lack of patience of European venture capitalists and the lack of scale capital. Kanji pointed out that in the last five years the US has spent seven times more than all of Europe combined on gen AI. It is still necessary for the best European startups to go to the US to acquire funding or even relocate there.
To build really big companies you want to export those companies as fast as possible to the American market.
Kanji brought up that when spending in the US and Europe is equal, the outcomes are equal, however Europe lags far behind in spending. A major gap in funding is mostly seen in later stages of funding; Europe has much improved its accessibility to early funding but lacks the continued scale venture needed to turn startups into unicorns.
Europe is lacking the exit opportunities; there are very weak IPO markets.
The final crucial challenge European startups are facing is the lack of exit opportunities; most unicorns exit via IPO and the markets for that in Europe are weak. The other major exit is acquisition, which is also blunted by the fewer big companies in Europe willing and looking to acquire these unicorns.
You sell small tech companies to big tech companies; the big tech companies just happen to be on the west coast.
While Europe is improving its tech, its startup scene still trails behind the US.
Looking Toward the Future
Europe has the talent and ability to make unicorns, but for the moment lacks funding. American companies like Hussein’s are bringing the American mindset (and check books) to Europe. While there are issues in the European venture capital space, it has been growing and developing rapidly and will continue to do so.
Interested in knowing more about European startups? Check out this article: 2025 Top 100 Rising European Startups
