In the most literal sense, "being a unicorn" means nothing more than in the last funding round, they sold X% of the company for $Y, and (100/X)*Y >= 1,000,000,0

In the most literal sense, "being a unicorn" means nothing more than in the last funding round, they sold X% of the company for $Y, and (100/X)*Y >= 1,000,000,000 For example, if DizruptrCo Inc, sold a 15% equity stake for 200 million, they are a unicorn "valued" at $1.333 billion. How they come up values for X and Y are part of the VC fundraising black magic. What's being reported here and a lot of other places recently, however, is that VC investors are actually willing to put an abnormally high value on Y in late rounds, because liquidation preferences mean they are very unlikely to lose money. Founders also love this, because it means they get to join the Unicorn Club, hopefully on their way to the Three Comma Club. This is whats meant by unicorn valuations being "inflated". As always, the people who get screwed the hardest if things go south is the employees. People are starting to figure out, however, that a down round, or really anything short of a spectacular exit, for an inflated unicorn means their options and equity are probably going to end up worthless. This could lead to all the best talent running for the door as fast as they can, death spiral, etc.