Let’s discuss unicorns—the billion-dollar start-ups that used to be as elusive as their name suggests. A decade ago, when Aileen Lee of Cowboy Ventures popularized the term, the list consisted of only 39 companies. Bring forward to the present, and the count has grown to more than 1,500 worldwide with a collective valuation of well over $5 trillion, per Crunchbase. But things are changing. Most of these high-fliers are now fighting to hold on, and the startup game rules are being rewritten.
What was once a prestigious badge of honor, unicorn status, has become a little… watered down. With venture capital pouring in and valuations soaring, the term lost some of its luster. EquityZen says it straight out: “The unicorn status lost some of its luster” when the market grew from a few solo standout companies to a large, bunching herd. Some past favorites have crashed back to reality. Bolt, for example, previously estimated at $11 billion, is now reportedly valued at just $300 million—a precipitous fall from favor.
And this is not a one-time thing. The secondary market, in which shares of private firms are sold and purchased, shows a clearer picture. In the last two years, almost 28% of unicorns listed on EquityZen’s platform fell below the billion-dollar threshold. That is, over 330 firms quietly lost their unicorn horns. Down rounds—funding rounds at valuations lower than before—are becoming increasingly common. 44% of late-stage raises are flat or down. Even high-profile IPOs such as Instacart’s came in below their previous private valuations. As EquityZen puts it, “Maybe flat, or even down 30%, is the 2024 version of a 2021 up round.”
Not all industries are being battered equally. Unicorns in real estate, industrials, and healthcare took the biggest hits, losing almost half their billion-dollar valuations. By contrast, fintech, food & beverage, and particularly AI companies are faring much better. 14–21% of their unicorns only dropped below the threshold, indicating they’re better insulated from today’s market conditions. Enterprise SaaS and IT sit in the middle, with roughly 25–33% of their unicorns falling below the line.
What’s causing this to happen?
First, the end of the zero-interest-rate world has induced capital to be more costly and investors to be more risk-averse. The patience for “growth at all costs” is in decline. Fewer than 25% of U.S.-based unicorns are profitable, Pitchbook says. That’s driving VCs to focus on exits and financially sustainable business models. In the meantime, mergers and acquisitions have slowed, in part driven by heightened regulatory oversight, resulting in fewer avenues for easy exits.
Still, there’s opportunity—just not always where you’d expect it. Aileen Lee, reflecting on the past decade, has her eye on what she calls “unsexy tech.” These are the foundational, behind-the-scenes technologies—automation tools, infrastructure solutions, enterprise platforms—that keep industries running. In an interview with TechCrunch, Lee emphasized that the next great wave of unicorns might not make headlines, but they’ll solve real-world problems at scale.
Artificial intelligence is spearheading that trend. Among the 95 companies that became part of Crunchbase’s Unicorn Board in 2023, 20 were artificial intelligence—more than in any other category. Fintech, cleantech, and semiconductors ranked second but didn’t keep up with AI. “AI was the top sector,” Crunchbase says, adding 20 new unicorns in one year. Though overall unicorn creation slowed down, AI still attracts money and generates enthusiasm.
At the same time, the secondary market is increasingly being used to value real-time startups. The typical private company is currently trading at a 30% discount to its previous funding round—a significant improvement from the 51% discount seen during the close of 2022. That’s a signal that the market might be stabilizing.
The unicorn tale isn’t finished, but it is growing up. As Lee notes, the unicorn trend is still going strong, but expectations have changed. She forecasts more than 1,000 new unicorns in the U.S. in the next decade—but this time, the ride will be different. The next wave of billion-dollar businesses may not be the most flashy, but they’ll probably be more resilient, more sustainable, and fueled by technologies that humbly—but profoundly—change the world.
