the pace that New billion dollar startups are in free fall.
Given what we’ve seen recently regarding the late-stage financing market, we shouldn’t be shocked. As late-stage dollar declines and capital offerings in massive rounds — deals worth $100 million or more — evaporate, the fuel that once propelled many emerging rockets into the valuation upper echelon has faded. It makes sense that fewer companies would reach the height of a rhinoceros.
Initially, I wanted to make an argument that contrasted the decline in M&A activity and initial public offerings with the decline in new unicorn creation, stating that without the ability to exit, naturally The speed at which new unicorns are created will decrease. If the paper tags fail to liquefy, the paper tags will become less valuable, right?
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This is a very generous explanation, as it rests on the assumption that unicorns minted in the past were in fact worth what they were purported to be.
Sure, the latest giant venture capital round has already spawned some real unicorns. Uber is worth about $60 billion. Coinbase is worth a little more than $16 billion this morning – you can fill in other names. But these are the outliers: Most unicorns haven’t found a way out, and as the market discovers most billion-dollar startups aren’t normal, the flow of capital to them has slowed considerably.
Let’s take the argument one step further: If most unicorns didn’t exit during the boom and can’t now do so with their real valuations below their last private mark (and likely below the billion-dollar threshold today), then the startup was in question. Ever really a unicorn?
I would assume the answer is no. Most unicorns are never what they were claimed to be. Instead, plenty of startups with big LARP budgets have been awarded as unicorns thanks to massive venture capital funds, which in turn are fueled by a combination of low interest rates and the volatile global economy brought about by COVID.
Do not believe me? Check out this chart from the new CB Insights Q1 project report: