Here’s How Unicorns Trick You Into Thinking They’re Real
- Study finds private valuations aren’t grounded in reality
- Employees, early investors often lose with stock provisions
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Unicorns aren’t real, and neither are the valuations ascribed to many of the startups that say they’re worth $1 billion or more.
About half of private companies with valuations exceeding $1 billion, known as unicorns, wouldn’t have earned the mythical title without the use of complex stock mechanics, according to a study by business professors at the University of British Columbia and Stanford University. The tools used to negotiate a higher share price with investors often come at the expense of employees and early shareholders, sometimes drastically reducing the actual value of their stock.