In the SmartUp methodology, the concept of the Unicorn is used to critique the speculative nature of Venture Capital valuations. Yonatan Stern refers to Unicorns as companies that often “do nothing” yet achieve massive valuations disconnected from revenue or profitability. This critique is illustrated through a clip from Silicon Valley, where the joke that ROI stands for “Radio on Internet” highlights the idea that companies without revenue can be valued infinitely higher than those with measurable returns.
The lectures explain that during hot market cycles, such as 2018-2021, many Unicorns emerged based on hype and growth narratives rather than cash generation. These valuations are often described as “pure play,” where the absence of revenue prevents investors from calculating ROI, allowing speculative billion-dollar valuations to flourish.
From the Venture Capital perspective, Unicorns are a structural necessity. VCs rely on a power law model where most investments fail or break even, and a single massive success – the “jewel in the crown” – must return the entire fund. To create these outcomes, VCs push startups to grow at unsustainable rates, prioritizing revenue growth and speed over profitability, often aiming for an IPO where valuation is driven by growth multiples.
SmartUp challenges this narrative with statistical reality. An analysis of Israeli startups founded between 2000 and 2024 shows that fewer than 100 out of more than 20,000 went public in the US, and only 38 reached valuations above $100 million. If reaching $100 million is already a 1-in-500 outcome, achieving a $1 billion valuation is statistically negligible. SmartUp argues that founders should not bet their careers on such low-probability outcomes.
Instead of chasing Unicorn status, SmartUp promotes building profitable companies. A business that generates consistent profit becomes a cash-generating machine, offering founders independence, sustainability, and the ability to play the Infinite Game. While these companies may never be Unicorns, they can still produce highly lucrative exits and long-term financial freedom.
