Startups

Losing the horn: VCs think majority of unicorns aren’t worth $1 billion anymore

Comment

unicorn, valuation
Image Credits: Getty Images

The past few years have been a rollercoaster for the startup world’s herd of unicorns.

Two years ago, we saw a record number of companies cross the $1 billion valuation milestone. But that momentum slowed to a trickle last year, and this year’s market conditions look likely to reverse course to a point that we may witness some of those companies losing that status.

Down rounds are likely to become the norm this year as venture firms and investors look to bring valuations back to earth. We’ve already started to see some decacorns, like Stripe and Instacart, lowering their valuations, but they are so highly valued that they aren’t at risk of losing their unicorn status. But most unicorns don’t enjoy that luxury.

CB Insights’ unicorn index shows that there are 1,205 companies currently worth over $1 billion. But if you look closely, you’ll notice that the majority of these startups are actually hovering right at the $1 billion mark. Currently, 685 unicorns were last valued between $1 billion and $2 billion — that’s more than half the list.

How many of these will stay unicorns through this calendar year? To find out, we recently surveyed more than 35 investors on how many startups they thought would drop below the $1 billion valuation mark in 2023. While nobody could peg a specific number, of course, the vast majority felt the herd has likely already been winnowed.

Several investors predicted that about a third of current unicorns are no longer worth $1 billion. When you consider that more than half of these startups hover right above that $1 billion line, per CB Insights, this seems like a slightly conservative take, especially given how much public company and larger startup valuations have shrunk.

“Up to a third, I would say, are decidedly worth less than [$1 billion], especially for the companies whose paper valuations are between $1 billion and $2 billion. Companies with high burn rates and structurally unsound unit economics will suffer the most (e.g., quick commerce delivery),” said Harley Miller, founder and managing partner at Left Lane Capital.

“It’s not just about whether they’ll still command ‘unicorn status,’ but rather whether or not they will be fundable, at any value, period.”

Ba Minuzzi, the founder and general partner at UMANA House of Funds, backed up that prediction with research from her portfolio.

“We kicked off the year [2022] with five portfolio companies holding the ‘unicorn status,’ two of which have already lost that status this year,” she said. “I believe this data is indicative of the overall theme — that two out of every five unicorns will or have lost their $1 billion valuation status. I do see this trend continuing in 2023.”

Several investors expect that number to be much higher, though, with predictions ranging from half, to 80% or even 90%.

For investors like Kirby Winfield, the founding general partner at Ascend VC, 80% of unicorns today are likely no longer worth $1 billion due to their public market comparable companies. Unlike early-stage startups, which are too far away from going public for public companies to be a good gauge, he thinks later-stage companies will meet a similar fate as their public counterparts.

Many companies at risk of losing their unicorn horn have been able to hide their misfortune thus far because they raised enough capital in 2020 and 2021 to have enough runway to put off raising in 2022. But many will start to run out of cash in 2023 and need to turn to their investors — a case in point being Norwegian grocery delivery company Oda, which dropped below the $1 billion valuation mark in December.

“Probably 80% of unicorns are not actually worth $1 billion right now,” Jon Lehr, co-founder and general partner at Work-Bench, said. “While most companies replanned in 2022 to extend their runway, 2023 is going to be the year of reckoning for unicorns. Most will see their horns (or wings?) clipped, as they can no longer delay fundraises given runway concerns and will need to raise down rounds.”

Just how many will get kicked out of the herd? We’ll have to wait and see.

More TechCrunch

Private social networking is making a comeback. Gratitude Plus, a startup that aims to shift social media in a more positive direction, is expanding its wellness-focused, personal reflections journal to…

Gratitude Plus makes social networking positive, private and personal

With venture totals slipping year-over-year in key markets like the United States, and concern that venture firms themselves are struggling to raise more capital, founders might be worried. After all,…

Can AI help founders fundraise more quickly and easily?

Google has found a way to bring a variation of its clever “Circle to Search” gesture to iPhone users. The new interaction, launched in January, allows Android users to search…

Google brings a variation on ‘Circle to Search’ to iPhone users

A new sculpture going live on Wednesday in the Flatiron South Public Plaza in New York is not your typical artwork. It combines technology, sociology, anthropology and art to let…

Always-on video portal lets people in NYC and Dublin interact in real time

Apple’s iPad event had a lot to like. New iPads with new chips and new sizes, a new Apple Pencil, and even some software updates. If you are a big…

TechCrunch Minute: When did iPads get as expensive as MacBooks?

Autonomous, AI-based players are coming to a gaming experience near you, and a new startup, Altera, is joining the fray to build this new guard of AI agents. The company announced…

Bye-bye bots: Altera’s game-playing AI agents get backing from Eric Schmidt

Google DeepMind has taken the wraps off a new version AlphaFold, their transformative machine learning model that predicts the shape and behavior of proteins. AlphaFold 3 is not only more…

Google DeepMind debuts huge AlphaFold update and free proteomics-as-a-service web app

Uber plans to deliver more perks to Uber One members, like member-exclusive events, in a bid to gain more revenue through subscriptions.  “You will see more member-exclusives coming up where…

Uber promises member exclusives as Uber One passes $1B run-rate

We’ve all seen them. The inspector with a clipboard, walking around a building, ticking off the last time the fire extinguishers were checked, or if all the lights are working.…

Checkfirst raises $1.5M pre-seed to apply AI to remote inspections and audits

Close to a decade ago, brothers Aviv and Matteo Shapira co-founded a company, Replay, that created a video format for 360-degree replays — the sorts of replays that have become…

Controversial drone company Xtend leans into defense with new $40 million round

Usually, when something starts to rot, it gets pitched in the trash. But Joanne Rodriguez wants to turn the concept of rot on its head by growing fungus on trash…

Mycocycle uses mushrooms to upcycle old tires and construction waste

Monzo has raised another £150 million ($190 million), as the challenger bank looks to expand its presence internationally — particularly in the U.S. The new round comes just two months…

UK challenger bank Monzo nabs another $190M as US expansion beckons

iRobot has announced the successor to longtime CEO, Colin Angle. Gary Cohen, who previous held chief executive role at Timex and Qualitor Automotive, will be heading up the company, marking a major…

iRobot names former Timex head Gary Cohen as CEO

Reddit — now a publicly-traded company with more scrutiny on revenue growth — is putting a big focus on boosting its international audience, starting with francophones. In their first-ever earnings…

Reddit tests automatic, whole-site translation into French using LLM-based AI

Mushrooms continue to be a big area for alternative proteins. Canada-based Maia Farms recently raised $1.7 million to develop a blend of mushroom and plant-based protein using biomass fermentation. There’s…

Meati Foods bites into another $100M amid growth to 7,000 retail locations

Cleaning the outside of buildings is a dirty job, and it’s also dangerous. Lucid Bots came on the scene in 2018 with its Sherpa line of drones to clean windows…

Lucid Bots secures $9M for drones to clean more than your windows

High interest rates and financial pressures make it more important than ever for finance teams to have a better handle on their cash flow, and several startups are hoping to…

Israeli startup Panax raises a $10M Series A for its AI-driven cash flow management platform

The European Union has deepened the investigation of Elon Musk-owned social network, X, that it opened back in December under the bloc’s online governance and content moderation rulebook, the Digital Services Act…

EU grills Elon Musk’s X about content moderation and deepfake risks

For the founders of Atlan, a data governance startup, data has always been at the heart of what they do, even before they launched the company. In fact, co-founders Prukalpa…

Atlan scores $105M for its data control plane, as LLMs boost importance of data

It is estimated that about 2 billion people, especially those in lower and middle-income countries, lack access to quality and affordable essential medicines. The situation is exacerbated by low-quality or even killer…

Axmed raises $2M from Founderful to streamline drug supply chains in underserved markets

For decades, the Global Positioning System (GPS) has maintained a de facto monopoly on positioning, navigation and timing, because it’s cheap and already integrated into billions of devices around the…

Xona Space Systems closes $19M Series A to build out ultra-accurate GPS alternative

Bankruptcy lawyers representing customers impacted by the dramatic crash of cryptocurrency exchange FTX 17 months ago say that the vast majority of victims will receive their money back — plus interest. The…

FTX crypto fraud victims to get their money back — plus interest

Google on Wednesday launched its digital wallet in India with local integrations, nearly two years after the app was relaunched as a digital wallet platform in the U.S. As TechCrunch exclusively reported last month,…

Google Wallet is now available in India

Bluesky has launched a new product roadmap for the coming months. The decentralized social network said on Tuesday that it is planning to introduce direct messages, support for videos, improved…

Bluesky to add DMs, video support and in-app custom feed curation

Samsung Medison, a medical device unit of Samsung Electronics that specializes in developing diagnostic imaging devices, said on Wednesday it plans to acquire Sonio, a Paris-based startup that makes AI-powered software…

Samsung Medison to acquire French AI ultrasound startup Sonio for $92.7M

Kyle Kuzma is a lot of things. He’s a forward for the Washington Wizards NBA team and a 2020 NBA champion. He’s also a style icon — depending on who…

NBA champion Kyle Kuzma looks to bring his team mentality to Scrum Ventures

Ofcom is cracking down on Instagram, YouTube and 150,000 other web services to improve child safety online. A new Children’s Safety Code from the U.K. Internet regulator will push tech…

Ofcom to push for better age verification, filters and 40 other checks in new online child safety code

Lipids are fatty, waxy or oily compounds that, for instance, typically come in the form of fats and oils. As a result they are heavily used in the production of…

After a $20M Series A funding, Germany’s Insempra plans eco-friendly lipid production

Tesla CEO Elon Musk has said that lidar sensors are a “crutch” for autonomous vehicles. But his company has bought so many from Luminar that Tesla is now the lidar-maker’s…

Tesla is Luminar’s largest lidar customer

U.S. realty trust giant Brandywine Realty Trust has confirmed a cyberattack that resulted in the theft of data from its network. In a filing with regulators on Tuesday, the Philadelphia-based…

Brandywine Realty Trust says data stolen in ransomware attack