The Unicorn Puzzle

Daria Davydova, Ruediger Fahlenbrach, Leandro Sanz and Rene M. Stulz
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Daria Davydova: Ecole Polytechnique Federale de Lausanne
Leandro Sanz: Ohio State University
Rene M. Stulz: Ohio State University and ECGI, Brussels

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: From 2010 to 2021, 639 US VC-funded firms achieved unicorn status. We investigate why there are so many unicorns and why controlling shareholders give investors privileges to obtain unicorn status. We show that unicorns rely more than other VC-funded firms on organizational capital as well as network effects and the internet. Unicorn status enables startups to access new sources of capital. With this capital, they can invest more in organizational intangible assets with less expropriation risk than if they were public. As a result, they are more likely to capture the economies of scale that make their business model valuable.

JEL-codes: G24 G32 G34 (search for similar items in EconPapers)
Date: 2022-11
New Economics Papers: this item is included in nep-fmk, nep-pay and nep-sbm
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Working Paper: The Unicorn Puzzle (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2022-12

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