A unicorn, in startup vernacular, was designed as a term to describe a rare event for a young tech company: a $1 billion valuation. But in 2021, unicorns were more ubiquitous than ever.
There were a record number of global unicorn startups in 2021, with 596 startups raising rounds at $1 billion valuations or higher, according to Pitchbook. In 2021, there were 340 unicorn deals in the U.S. alone.
More unicorns were minted in 2021 than in the previous five years combined, Pitchbook said.
Just like it has with startup layoffs and venture capital deals in general, 2022 has been a much different story for startup unicorns due to upheaval in private capital markets, broader economic concerns and other factors.
The pace of new $1 billion startups has "fallen precipitously in recent months," according to a new Pitchbook report. This year, just 308 global startups and less than 200 in the U.S. reached unicorn status.
There has been a noted deceleration during the year, with just nine U.S. venture funding rounds that resulted in a post-money valuation of $1 billion or higher in November compared to 48 in January, according to Pitchbook — a trend expected to continue.
"We also believe that down rounds and further slowing of valuation growth are likely to be trends in U.S. venture in 2023," Pitchbook's report notes.
The report, which provides an early outlook for U.S. venture capital activity for 2023, also shows mega funding rounds, classified as $100 million or more, will fall to a three-year low in 2023. Pitchbook estimates less than 400 mega deals will take place next year, down from an expected 550 such deals in 2022 and well off 2021's count of 836.
Next year's estimates are based on continued quarterly declines of mega deals in 2022. With large funding rounds on the decline, it's no wonder unicorn deals have been harder to come by.
And with down rounds — venture funding rounds where startups see a decrease in valuation — becoming more common, the unicorn herd could be thinned ever more, Pitchbook said. Around a quarter of all unicorn startups have a valuation of less than $1.2 billion, according to Pitchbook, meaning an influx of down rounds could put some startups at risk of losing their unicorn status.
On the plus side, there were still more global unicorns mined in 2022 (308) than in 2020 (198), 2019 (152) or 2018 (149).
As we've noted, the number of unicorns aren't the only metric to fall back to earth following sky-high numbers in 2021.
Startup funding in general has slowed, affecting mature startups on the precipice of an exit and early-stage startups alike.
