Image: Reaching a Billion-Dollar Valuation

Recent research by Cowboy Ventures shows that only four internet companies per year for the past decade have reached the billion-dollar valuation milestone. Those that reach that milestone are often referred to as unicorns. With only four unicorns born each year, where will the next one emerge?

Recently, we saw one unicorn create another. When Facebook offered $3 billion to acquire Snapchat, it established a valuation for the company that was considered a “seemingly imminent” unicorn just two weeks before. While Snapchat resisted the temptation to join Facebook, it’s telling that unicorns buying unicorns is not a considerable trend. While Google may have set the trend with its acquisition of YouTube and the follow-up this year with Waze, Facebook’s billion dollar price for Instagram and VMWare’s acquisition of Nicira made only a handful of unicorns.

By far the greatest creators of unicorns are the companies themselves. Those that are the most successful and ultimately join the club are the ones that have the drive and determination to remain independent, to access the public markets for continued growth through IPO, and to eventually become an acquirer themselves.

Cowboy Ventures reported little diversity among the company founders in this unicorn club. Nearly half of the unicorns in the last decade have had IPOs, and about a quarter have been acquired (and about half of those by other unicorns), Cowboy Ventures found. Less than a third remain. There are 12 private companies left on the unicorn list, but half of those are widely rumoured to be readying for IPOs in 2014.

While it is difficult to build a billion-dollar company, 39 companies in the past ten years have shown it is possible.  As we head into the future, we can watch and learn from those that do manage to join the unicorn club.