Are we overplaying the ‘unicorn’ game?

March 21, 2014, 10:55 PM UTC

FORTUNE — Later today I’m scheduled to interview the CEO of an enterprise technology company that next week will announce a new round of venture capital funding. It’s the sort of thing that I get asked to do a lot — probably a dozen times per day — but agreed to this one because of a very brief PR pitch that didn’t even include the company’s name. Instead, it simply informed me that the funding valued this mystery company at $1 billion.

Ah, $1 billion. The thing that unicorns are made of. The thing that’s cool. The thing that (apparently) gets me to take a call before I even know who’s going to be calling.

It would be my third “unicorn” story in the past two weeks, following online ticketing platform Eventbrite last Thursday and mobile messaging company Tango yesterday morning. Or my fourth, if you include my Q&A with Castlight investor Bryan Roberts. And I couldn’t even find time to write about Airbnb’s apparent efforts to raise at a whopping $10 billion valuation (i.e., the much mythologized Decacorn).

In each and every case, hitting a $1 billion private valuation is a remarkable accomplishment. Remember, these usually are companies that weren’t even a gleam in their founder’s eyes at this time last decade. So kudos to all to achieve, and continued coverage.

But here’s the thing that’s beginning to trouble me a bit: The collective we are focusing so much on these massive interim valuations that we, arguably, aren’t paying enough attention to better financial outcomes that don’t include nine zeros. And this is particularly true when we cover those who are writing the checks.

Here’s what I mean: Imagine that ABC Ventures invests $50 million at a $1 billion post-money valuation, in exchange for a 5% equity stake (yes, I’m really simplifying things here). Then the company goes public at a $2 billion valuation, and later trades up to $5 billion. Suddenly that investment is valued at $250 million. Fantastic. Now what if 123 Ventures invests $5 million at a $25 million post-money valuation, and the company gets acquired by Yahoo for $250 million (thus paying out $50 million to 123 Ventures). Seems to me that 123 Ventures arguably got the better deal, in that it recognized a 10x multiple, whereas ABC Ventures recognized a 5x multiple.

But we don’t publicly venerate 123 Ventures, because they didn’t have a “unicorn.” The reality, however, is that the majority of VC firms invested in $1 billion+ companies didn’t really have unicorns either. A few certainly did — those who were at the very beginning — but most came along so late in the game that they were just hitching a ride.

Take what Forbes does with its annual Midas List, which purports to rank the world’s top tech venture capitalists. Most of the calculations are done based on exits (i.e., M&A or IPOs), but Forbes also incorporates data on a handful of unicorn-type companies that are still private (thus explaining, for example, how Accel’s Jim Breyer topped the list even before Facebook went public). Never mind if 123 Ventures has a dozen still-private companies where it has double-digit paper multiples, because none of those companies are valued at $1 billion. Better to buy into a big Series C for Airbnb than to have Series A preferred stock in a quasi-anonymous biotech that just raised its Series D at a $150 million or $200 million valuation.

Yes, venture capital is a hits business. Each fund needs one or two giant outliers in order to generate the returns they promise investors. But perhaps we all need to do a better job identifying those outliers, as opposed to just obsessing over unicorns.

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