I find noticeable bunching in venture capital (VC)-backed company valuations at $1 billion, the minimum threshold to be so-called unicorn companies. Exploiting the practice that reported valuations include authorized but unissued shares, VC-backed companies strategically authorize more shares for future employee compensation (e.g., stock options) to achieve unicorn status. Various stakeholders of VC-backed companies, especially employees who face uncertainties and information asymmetry, interpret unicorn status as a positive signal. Contrary to employees’ interpretation, however, inflating valuations to achieve unicorn status lowers the expected value of their stock options. Providing simple stock option payoff diagrams to employees can reduce information frictions.