A decade has swiftly passed since Aileen Lee of Cowboy Ventures coined "unicorn" in a TechCrunch article to describe the rare breed of startups valued at over $1 billion, exactly 10 years ago on this day.
Defined at the time as “U.S.-based software companies started since 2003 and valued at over $1 billion by public or private market investors,” the term has since expanded to encompass all private startups valued at $1 billion or more.
Lee's foresight proved accurate as the tech world witnessed an explosion in unicorn births, with the number soaring by a staggering 115% in the two years following her 2013 piece. As of now, Crunchbase tallies 1,484 unicorns, worth a combined $5 trillion, while CB Insights places the figure at 1,220 with a $3.83 trillion valuation.
Yet, what was once a flood of billion-dollar valuations has trickled to a drip in the current market. CB Insights reports a mere 12 new unicorns in Q3 of 2023—the lowest since 2016.
This slowdown strikes at venture capitalists' hearts, for whom a stable stream of unicorn exits is vital to sustain their investment returns. In an environment where a $400 million VC fund once seemed substantial, industry titans like a16z are now assembling funds in the billions.
But with the current pace of unicorn creation stuttering and exits remaining elusive, the venture capital scene faces a pressing conundrum. High-interest rates are making alternative investments more tempting, and with a backlog of private-market giants awaiting liquidity events, investors are left pondering two crucial questions: How many unicorns truly merit their billion-dollar tags, and what are their prospects for yielding returns in this economic climate?
On the anniversary of the term that reshaped startup aspirations, the tech ecosystem reflects on an era that saw the unicorn list balloon and then contract. From a sparse population to an overgrown field, to what some might call an endangered species, the unicorn journey mirrors the wild, tumultuous, and ever-fascinating tech landscape.