Turns out most unicorns are more myth than reality these days


The pace at which new billion-dollar start-ups are in freefall.

Given what we’ve seen recently regarding the late-stage funding market, we shouldn’t be shocked. As late-stage dollars recede and capital served in mega rounds — deals worth $100 million or more — evaporates, the fuel that once propelled many a startup rocket into the valuation stratosphere has sputtered. It makes sense that fewer companies reach unicorn height.

Initially, I wanted to make an argument between declining M&A and IPOs with the decline of new unicorn creation, pointing out that without the ability to stop, Naturally the rate at which new unicorns were created would slow down. If paper markers didn’t liquefy, paper markers would lose value, wouldn’t they?

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That’s an overly generous interpretation, because it rests on the assumption that the unicorns minted in the past were actually worth what they claimed to be.

Sure, the latest venture capital supercycle really built some real unicorns. Uber is worth more than $60 billion; Coinbase is worth just over $16 billion this morning – you can fill in other names. But those are the outliers: most unicorns haven’t found their way out, and as the market discovers that most multibillion-dollar startups aren’t natural, the capital pouring into them has slowed to a trickle.

Let’s take the argument one step further: if most unicorns didn’t leave during the boom and can’t do so now with their actual valuations below their last private mark (and probably below the $1 billion threshold today ), was the startup in question ever really a unicorn?

I would argue the answer is no. Most unicorns were never what they claimed to be. Instead, many startups were given big budgets to LARP like unicorns thanks to outsized venture capital funds, in turn based on a combination of low interest rates and a choppy global economy caused by COVID.

Do not you believe me? Check this chart from the new CB Insights Q1 venture report: