The dawning of the unicorpses: The boom and bust of billion-dollar startups
Time for a flashback. Nine years ago, Term Sheet alums Dan Primack and Erin Griffith wrote a cover story for Fortune on these burgeoning, mystical companies called unicorns.
At the time, there were 80 of those companies. Yes, 80. Want to know how many there are now? More than 1,200 (depending on who you ask, of course).
As I wrote about for Fortune’s latest cover story, the last (almost) decade has been remarkable for startups. Low interest rates made the venture sector more enticing to investors as venture returns exceeded those of the public markets. The success of startup IPOs drew hedge funds and mutual funds into the equation (more capital—yay!). And then there was the pandemic-induced tech boom in 2020 and the extraordinary $2 trillion stimulus. That created the nonsensical frenzy that was 2020 and 2021, where you didn’t even need to have revenue to go public at more than a billion-dollar valuation.
Flash forward to today and you have a) the Federal Reserve gradually raising its baseline interest rate more than tenfold, b) a steep correction in the public markets, with software, internet, and fintech stocks taking a nosedive, and c) war in Eastern Europe and, more recently, the Middle East plus heightened tensions between the U.S. and China.
All of this has caused the atmosphere to turn undeniably sour for startups. Whereas two years ago founders were elbowing investors out of their oversubscribed funding rounds; now some are struggling to raise at all, and are facing the harsh reality that their businesses are worth much less than they thought. The IPO market has dried up relative to 2021, and M&A deals have become harder to secure and close—keeping investors from being rewarded for their bets. After more than a decade of an overabundance of capital, cash has suddenly become scarce.
A handful of these unicorn darlings have already shut down and called it quits. But most of the pullback has been quietly playing out behind the scenes. Until now.
You can read my cover story for Fortune here, to find out how we got here and who has the best odds for survival.
Is it too late to make the case for blockchain? Chris Dixon doesn’t think so. My colleague Leo Schwartz interviewed the “philosopher king of crypto” about the new book he began writing around the time FTX collapsed. “I was like, ‘fuck, this is depressing,’ and then I felt sorry for myself,” a16z's Dixon told Schwartz over breakfast. The book, which Schwartz describes as a combination of the bible and a self-help book for blockchain believers, will be released later this month. You can read Schwartz’s story here, and, if you are so inclined, you can read the profile I wrote two years ago about Dixon here.
Until Monday,
Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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Joe Abrams curated the deals section of today's newsletter.
This story was originally featured on Fortune.com
