40% of VC-funded US unicorns valued below $1 billion in secondary markets

Around 40% of US-based tech unicorns that have raised capital from venture funds are currently trading at valuations below $1 billion in the secondary markets, according to a blog post by Aileen Lee, cofounder of seed venture capital firm Cowboy Ventures.Lee, who coined the term unicorn for startups valued at $1 billion or more, said more startups are likely to join the club where unicorn valuations will trade lower.

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Lee emphasised that while the aggregate value of all unicorns is around $1.5 trillion, based on the valuation they last raised capital at, the actual number is considerably smaller. She also pointed out that operating runways are becoming shorter for many unicorns amid the ongoing macroeconomic conditions.

With the current environment and investors’ fear of ‘catching a falling knife’, she said more companies will face abrupt shutdowns in 2024.Over the past decade, the number of US unicorns has surged significantly, ballooning from 39 in 2013 to 532 in 2023. According to Lee, despite challenges, the unicorn club will continue to grow at a rate of 15% year-on-year, reaching 1,400 over the next decade.

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Presently, there are 416 unicorns that are in enterprise businesses, constituting around 78% of the total unicorns in the US, with a combined worth of $1.2 trillion. A decade ago, only 38% of unicorns belonged to the enterprise category, amounting to $55 billion in total value (20%).Top high-valued enterprise companies in the current landscape include OpenAI, Databricks, Samsara, VillageMD, and Cloud Kitchens.

Lee said that OpenAI is poised to become the first AI super unicorn, which is reportedly raising new funding at a valuation of around $100 billion.

Consumer companies now represent 20% of the aggregate value, marking a substantial decrease from the 80% they held in 2013.

Papercorns and ZIRPicons

The blog post further said that 93% of unicorns are ‘Papercorns’ – as they’re privately valued on paper, and have not yet provided any exits, while 60% are ‘ZIRPicons,’ a term coined for startups that haven’t raised money since the zero-interest period in 2021.

The valuations of these startups may be unpredictable due to their funding histories, she added.