CBInsights indicates that the world of commerce is currently home to 255 “unicorn” startups. “Unicorns” are business startups that are self-valued at one billion dollars in United States Dollars – at least they’re almost always valued in USD to keep measures of valuation equal throughout the third rock from the Sun.

How is a company valued at $1 billion, anyway? Does that mean such companies possess one billion dollars’ worth of assets? What if they don’t command the control of $1 billion in total assets but have, in fact, been given $1 billion in the form of investments by angel investors and venture capitalists  – does that make a startup eligible for the sought-after “unicorn” status?

In the same manner that unicorns aren’t real – they’re merely mythical creatures created by the imagination of people living some 2,400 years ago and have never been found to exist since then – startups labeled as unicorns are more than what meets the proverbial eye.

Understanding how valuations of young startups work is essential to understanding the processes by which unicorns can be considered unicorns

Startups practically always receive substantial investments from alternative asset management firms, private investors, venture capitalists, and angel investors. Without such investments, startups wouldn’t typically be able to achieve the massive scales of growth they frequently do.

Executives, owners, and founders of these startups present the basics of their businesses to private individuals and rooms chock-full of investors to receive such investments. Startups typically seek out investors who have recently poured money into ventures that match their industry – chronic manufacturing-oriented investors won’t pay the same for a tech startup as they will a blue-collar-oriented startup.

Startups are never valued independently – their self-purported values are only true when believed by investors.

Many startups have no revenue

That’s right – countless unicorns are valued as such before making any material earnings if earning anything at all!

One reason why  so many startups are in Silicon Valley is that investors located there are more likely to fork obscene amounts of money over. The same goes for Los Angeles and New York City.

Unicorns get many things right – including selling their pitches at the right time

Startups that can tout consistent monthly increases in performance-related metrics typically go all-out as far as their efforts in presenting investment opportunities to potential funders. Prospective unicorns – at least successful ones – always pitch at the right time to secure such an illustrious title.