Unicorn Hunting: The Art and Science of Spotting the Next Game-Changing Startup

In the early stages — when product-market fit is just a hope and metrics are sparse — what do seasoned investors really look for? How do they separate potential breakthrough companies from the rest? As Mike Collins, CEO and Founder of Alumni Ventures, puts it: “What we’re really hunting for is the next team, idea, or founder with the potential to reshape an entire industry — years before the market sees it.”

Looking Beyond Product-Market Fit: Betting on the Founder

At the pre-seed and seed stages, investors are often betting on the founder more than the business itself. Visionary entrepreneurs have a way of thinking differently, sometimes to the point of being misunderstood. As Mike Collins explains, “Great founders challenge assumptions — they often see something the world hasn’t realized yet. This mindset can feel risky, but the entrepreneurs with relentless focus, adaptability, and resilience are the ones who turn bold ideas into reality.”

These rare founders often possess what Peter Thiel calls a “reality distortion field.” They’re storytellers who inspire others to believe in their vision, attracting talent and capital to transform ideas into thriving enterprises.

What we’re really hunting for is the next team, idea, or founder with the potential to reshape an entire industry — years before the market sees it.

Challenging Problems: The Source of Real Value

The startups that become unicorns don’t shy away from complexity. On the contrary, they take on the most challenging problems others avoid because they require deep expertise and long-term commitment. “In an age where quick wins are glorified, we value founders willing to wrestle with tough, technical challenges,” Mike says. “If it’s easy, it won’t be sustainable.”

Many of today’s unicorns emerged from technical innovation and domain expertise that created moats — strategic advantages that competitors struggle to cross. Whether it’s network effects, proprietary technology, or first-mover advantage, these differentiators often aren’t obvious in the early days. “Even Amazon started small, focusing on books, before expanding into the global retail giant it is today,” Mike notes.

Timing and Patience: The Fine Line Between Early and Too Early

Timing is everything in venture capital. Sometimes, the right idea comes before the market or infrastructure is ready to support it. For example, think of Apple’s Newton in the 1990s. Other times, founders who are slightly ahead of the curve need the patience and capital to wait for the market to catch up.

Mike explains, “When innovation builds on prior infrastructure, ideas often come to market simultaneously. We’re seeing that now in sectors like space and clean energy, where earlier investments have laid the foundation for future breakthroughs.”

The challenge for investors is determining whether the startup’s timing aligns with market readiness and being prepared to stick with the investment over the long haul. Successful venture capital often requires patience and capital reserves to chase winners as they mature.

The Power of Process Over Outcome

Mike emphasizes the importance of focusing on the process, not the outcome. “In venture investing, you’ll be wrong more often than right. Some startups will fail, even with the right team and idea. But the winners — the unicorns — will make up for the losses.”¹

He likens it to being a defensive player in sports: you can’t win every time, and losses are part of the game. “The key is staying disciplined, working with the right people, and maintaining a long-term view. Success in venture capital isn’t about quick wins but consistent, thoughtful bets over time.”

1. Venture capital investing involves substantial risk, including risk of loss of all capital invested. Achievement of investment objectives, including any pattern of successful investment, cannot be guaranteed.

In venture investing, you’ll be wrong more often than right. Some startups will fail, even with the right team and idea. But the winners — the unicorns — will make up for the losses.

Join the Conversation

If you’re intrigued by the art and science of venture investing and want to dive deeper into how VCs identify startups with unicorn potential, join Mike Collins for our upcoming Masterclass, ‘Unicorn Hunting: What VCs Look For.’ This exclusive session offers real-world insights into the venture landscape and an opportunity to engage with one of the industry’s most experienced investors.

Whether you’re a seasoned investor or just curious about venture capital, this event promises to equip you with new perspectives — and perhaps a few signals to help you spot the next unicorn.

This communication is from Alumni Ventures, a for-profit venture capital company that is not affiliated with or endorsed by any school. It is not personalized advice, and AV only provides advice to its client funds. This communication is neither an offer to sell, nor a solicitation of an offer to purchase, any security. Such offers are made only pursuant to the formal offering documents for the fund(s) concerned, and describe significant risks and other material information that should be carefully considered before investing. For additional information, please see here. Venture capital investing involves substantial risk, including risk of loss of all capital invested. This communication includes forward-looking statements, generally consisting of any statement pertaining to any issue other than historical fact, including without limitation predictions, financial projections, the anticipated results of the execution of any plan or strategy, the expectation or belief of the speaker, or other events or circumstances to exist in the future. Forward-looking statements are not representations of actual fact, depend on certain assumptions that may not be realized, and are not guaranteed to occur. Any forward-looking statements included in this communication speak only as of the date of the communication. AV and its affiliates disclaim any obligation to update, amend, or alter such forward-looking statements, whether due to subsequent events, new information, or otherwise.