Unicorn companies have become common, but their herds may be shrinking
From myth to mundane… When a venture capitalist coined the term “unicorn” a decade ago, private startups with billion-dollar valuations (think: SpaceX, ByteDance, Epic Games) were rare enough to warrant a fairytale nickname. A new report has found that the # of unicorns surged from 87 to ~1.4K over the past 10 years — less “unicorn” than “horse wearing a party hat,” tbh. In that time, unicorns’ market value has reared up 19X to $4.5T. But with zero-interest-rate days in the distant past, and VC cash drying up, unicorns are becoming rare once again.
Thinning herds: Last year saw 81 unicorns emerge globally, way down from 2022’s 330 (and the lowest in more than five years). 44% of new unicorns were AI related.
Hanging up the horn: About 3.2K private startups closed last year, including former unicorns such as trucking co Convoy (which wiped out investors like Jeff Bezos and Bill Gates), and robot pizza co Zume.
Running out of pasture… Just 10 unicorns were minted last month, a hefty fall from December’s 2021’s peak of 66. Some may not be mythical at all: 40% of US unicorns are trading at valuations below $1B in secondary markets. Many startups have shied away from fresh funding altogether to avoid lowered valuations. 60% of US unicorns are “zirpcorns”: billion-dollar startups that haven’t raised cash since interest rates were near zero.
In tough times, profit trumps potential… Startups are known for prioritizing growth over profits — a fact VCs were happy to accept during the low-interest-rate days. But as global VC returns went negative in the first three quarters of last year (while the stock market made strong gains), investors turned against big bets: last year VC fundraising hit a six-year low.