How to build a unicorn: Lessons from venture capitalists and start-ups

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        Understanding these facts and how they can be applied to other enterprises is particularly important for CEOs of large businesses looking to build new revenue bolster resiliency and court venture capitalists (VCs).To help incumbents launch new businesses we at Leap by McKinsey interviewed ten successful VCs and angel investors and analyzed 100 unicorns to distill what really matters in developing start-ups.

        More than 80 percent of founders gained work experience prior to building their successful venture and more than half had founded start-ups before.Founders of Asian scale-ups for instance commonly have less work experience prior to starting their venture.Strong fragmentation is one example of such a weakness: if a market has many players and no clear leaders it is often easier for a new entrant to disrupt it and build up significant market share.

        They look to invest in start-ups where the product or service not only works but also has early indicators of market interest.The expectation among VCs is that start-ups travel significantly along this innovation curve within two to three years.While it is common for successful start-ups to develop completely new technologies they can also develop a novel combination of existing technologies market existing technologies with new ones radically improve user experiences or simply operate far more efficiently than competitors.For example they bring on people with the specific skill sets that the new business needs set challenges for the business—in one case they asked the start-up team to come back with two signed letters of intent from committed customers to prove the willingness to pay—and identify potential M&A targets.Beyond the initial phase VCs have a clear eye on future growth and while most incumbents only think about incentivizing the initial founders will eventually want to see a stock-option pool for key hires and will look for an explicit willingness from the incumbent to potentially bring in other


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