More than 220 US startups that once reached billion-dollar valuations are now classified as “fallen unicorns,” according to exclusively provided PitchBook data. cnbc.
Startups that last raised funding in 2021 are worth an average of 68% less today; A 52% decline has been seen in those increasing in 2022. Nearly half of all 857 US unicorns have not raised new capital in three years.
The AI boom that has redirected over $250 billion into OpenAI and Anthropic has left pre-ChatGPT business models helpless.
Those dropped include iconic consumer brands that epitomized the decade’s direct-to-consumer trend, including Glossier, Rothy’s, Brooklinen and Rihanna’s lingerie company Savage x Fenty.
The list also includes darlings of the podcast era, including supplements brand AG1, investment management robo-advisor Betterment, ticketing startup SeatGeek and drone maker Skydio, which PitchBook claims has seen its valuation rise from more than $2.5 billion to now about $509 million.
A Skydio spokesperson rejected the figure, while AG1 declined to comment. reuters Later reports came that the brand was looking to sell itself at a valuation of $2 billion including debt. The list is dominated by software-as-a-service firms, which number 75, twice as many as financial technology.
AI-powered agents, which do not require humans to complete tasks, threaten to disrupt the software-as-a-service business model, where fees are based on employee usage. Former Head of Engineering at DoorDash AI Sales Platform Revo David Zutold
His working thesis after the ChatGPIT moment was clear: “All workflow-driven enterprise SaaS companies will either be disrupted or eliminated over the next decade.”
Companies built before generic AI tend to have bloated staffing models and software designed for a pre-AI world, making real change difficult. “Unless they make a 180-degree pivot to recreate the exact same thing from scratch, they will gradually fail,” Zhu said.
Without AI, for a tech company with 100 engineers, an acquisition price of approximately $2 million per engineer guaranteed an acquisition price of $200-$300 million regardless of the revenue the company generated.
According to Ryan Falvey of Restive Ventures, valuations have declined nearly sixfold since 2021 highs, meaning a company with similar revenues would now be worth 85% less than it was five years ago.
The numbers can be seen from recent acquisitions, where investment app Stash was sold to Grab in February for $425 million, significantly less than the $660 million it invested in it. In another deal, fintech Step was acquired by MisterBeast for an unspecified amount following a $500 million fundraising.
