Market-first or technology-first? Exploring unicorns’ pathways to extreme valuations

In this study, we explore: 1) whether unicorns predominantly emerge from a focus on developing novel technologies, understanding market needs, or a balanced integration of both; 2) how these three strategic orientations correlate with unicorns’ growth rates; and 3) how various unicorn features, including early access to funding, moderate answers to the first two questions. To address these questions, we hand-collect data on 137 unicorns and examine the timing of their first patent and trademark filings, initial institutional funding, and company characteristics. Our findings indicate that all three strategic orientations – technology-first, market-first, and balanced orientation – can lead to extreme valuations. Specifically, the market-first approach emerges as the most common, with the balanced orientation most frequently associated with high growth, and the technology-first approach linked with the highest growth. Additionally, unicorns receiving seed funding before filing their first patents or trademarks tend to exhibit significantly higher median growth rates compared to those filing for intellectual property rights before securing seed funding. This study contributes to the nascent literature on unicorns, and established literature streams on strategic orientation and the value of patents, trademarks, and initial funding as signals of unobserved quality for startups.