Everybody knows that a unicorn is a horse with a horn that does not exist. It is a mythical creature. The term has also been used to represent something very difficult to achieve.

Finance loves using animal terminology and having run out of farm animals, Aileen Lee, a venture capitalist, appropriated the word to describe a special type of company. The definition as stated in Wikipedia “is a privately held start-up company valued at over US$1 billion”.

The important thing to note about the definition of a unicorn is that it achieves a US$1-billion status, while still being private, ie, before listing on a stock exchange.

This is no easy feat. However, it has become easier for companies to achieve this status for several reasons.

These reasons include greater access to private capital from huge companies such as Facebook and Apple, technological advances, aggressive expansion and company buyouts.

You may think that you are not familiar with any unicorns, but some of the names are very familiar to most of us.

A prime example of one is Instagram. Instagram achieved unicorn status when the company was bought out by Facebook. In this example, it really was Facebook in discussion with Instagram that arrived at a valuation for the company of over US$1 billion.

When companies are sitting on a lot of cash it is more likely that they will seek out acquisitions which in turn increases the creation of unicorns.

Analysts are usually fascinated with unicorns, and for this reason, there is generally no shortage of press coverage on these companies.

The famous ones include Airbnb, Uber, Lyft, Pinterest and Ant Financial.

Ant Financial provides the payment system for Alibaba and the company was founded by Jack Ma who also founded Alibaba. Just in case you haven’t heard of Alibaba – it is in the top-10 list of the largest companies in the world and is larger than Amazon.

You may wonder what the application is to Jamaica.

Jamaica has its own unicorns, but of course for obvious reasons, we have to literally scale down the definition to allow for a much smaller market.

JMMB is one such unicorn that got its start through a venture capital firm which paid off very handsomely for the investors.

First Rock, more recently, raised a tidy sum in the private equity space.

There are other private companies in Jamaica that do extremely well, for example, I am sure that KFC is hugely successful, but they don’t release their performance to the public, therefore this makes identifying the unicorns in Jamaica more anecdotal in nature.

Jamaican companies generally seek the route of IPOs to get funding and to (hopefully) increase their valuations. However, if Jamaica started to mirror the US with cash rich companies choosing to acquire more companies, we could “start up” some baby unicorns!

The definition of a unicorn may attempt to limit us to the size of a company, but in keeping with the idea of the mythical creature, the dream is to identify and invest in companies that grow way above the market average and take us that much closer to achieving our dreams of great wealth. Good luck in your search!

Yanique Leiba-Ebanks, CFA, FRM is the AVP, Pensions & Portfolio Investments at Sterling Asset Management. Sterling provides financial advice and instruments in US dollars and other hard currencies to the corporate, individual and institutional investor. Visit our website at www.sterling.com.jm . Feedback: if you wish to have Sterling address your investment questions in upcoming articles, e-mail us at info@sterlingasset.net.