It turns out that unicorns aren't all that mythical or rare, at least when it comes to the modern meaning of the word.
These days, unicorns are private companies that have valuations of at least $1 billion. They're the type of hot startups that make investors salivate at their growth potential, prompting them to pour in more venture capital in the hopes of chasing down a mythical monstrous return.
While the name connotes something rare and beautiful, this kind of unicorn is becoming increasingly common, thanks to a surge in investment capital not only from venture capital firms, but hedge funds, corporations and high-net-worth individuals like Facebook co-founder Mark Zuckerberg.
That's evident in the number of newly christened unicorns this year. A new report from CB Insights and KPMG finds 23 unicorns across the globe, with 17 based in the U.S.
"There's a big demand for companies that are growing really fast and tackling these big opportunities," said Anand Sanwal, chief executive of CB Insights. "There aren't many companies like that, and as a result, you end up with these mega-financing rounds. A lot of them are now driven by hedge funds, corporations and atypical investors."
With more investors chasing the hottest private companies, that has led to higher and higher valuations, and the creation of "uber Unicorns," or private businesses with valuations of at least $10 billion. The market has become so hot that it's raising questions about whether the tech industry -- which tends to produce more unicorns than other industries -- is in the midst of another bubble.
So far, investors remain hopeful that valuations will keep rising, at least in the private arena. The public markets haven't been as receptive to IPOs and newly public companies as in past years, as evidenced by companies such as Etsy (ETSY), the online craft marketplace that's lost 19 percent of its market value since going public in April.
"There are people who say they're worried or that the markets are overheated," Sanwal said. Still, he said he's not seeing evidence of a slowdown.
But there are company-specific risks, such as when a once-hot startup fails to deliver on its promise to revolutionize its industry. Questions have been raised about Theranos, for instance, the biotech startup that promises to quickly process blood tests from patients' finger-pricks. But The Wall Street Journal has reported that only a fraction of its tests sold to consumers use its new technology.
When it comes to unicorns that turn out to be goats, the damage might not be as widespread as with failures in the public markets, given that it's only VCs and wealthy investors who may lose their well-tailored shirts.
Read on about the top 13 private companies by valuation.