The unicorn funding slump is worse than you thought

Welcome to Q4, friends. If you were hoping to begin the final chunk of 2022 with good news, tough. We’re starting the quarter off with rough data instead.

Sure, we’re waiting on data dumps from CB Insights, PitchBook and Crunchbase about Q3 venture capital aggregates, but one particular bellwether indicator that we track here at The Exchange is flashing weakness as we stare down a holiday- and event-filled race to the end of the calendar year.

We’re taking a look at unicorn fodder today. Unicorns eat capital and excrete value, at least in theory, a relationship that was in full swing last year. Huge, nine-figure venture capital rounds were fueled by crossover investors and others piling into startup territory, pushing up the valuation of many a startup to stratospheric levels. Some of those bets will pay off, like the Figma Series E from last June. Many will not.

What matters for our purposes, however, is that the pace at which unicorns are raising capital is slowing down not just from last year’s epic fundraising period but even compared to the more distant past. If unicorns are not able to raise as much this year as they did in, say, 2019, how many of the billion-dollar-plus startups are going to survive?

Not that we’re going to forecast a unicorn culling this early in the week, but the data is troubling.


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Today, we’ll consider Crunchbase data to get a handle on where investor sentiment rests today and then chat about what could break the logjam.

Note that M&A could help the situation somewhat — more on that matter on TechCrunch+ today — but will not be able to solve the tension of four figures worth of unicorns sitting in moribund late-stage private markets while the IPO window remains shut. No capital and no exit? That’s a cornering.

Unicorn funding in 2022

It’s easy to forget how quickly the venture capital market for late-stage startups exploded in recent years. Per Crunchbase’s unicorn dataset, unicorns raised just $11.4 billion in 2014. (Adding the routine disclosure that I used to work for Crunchbase and retain a small stake in it from my time there.)

That figure scaled to $21.4 billion in 2015 and $24.8 billion in 2016.

Then the numbers start to really climb. Unicorns raised $39.7 billion in 2017 and $101.1 billion in 2018. From that point, investors took a breather, putting a comparatively modest $76.1 billion into unicorns in 2019 and $98.3 billion in 2020.

Naturally, 2021 proved to be an outlier, with some $281.7 billion poured into startups worth at least $1 billion. The number of unicorns scaled with that massive deal-making spree. Today, Crunchbase reports, there are 1,404 unicorns that have raised $822 billion over time and are worth $4.8 trillion in aggregate.

It’s just that after a massive 2021, new capital is becoming somewhat scarce. Crunchbase counts just $70.5 billion invested into unicorns thus far in 2022. Let’s do a little math to put that number into context:

  • If we extrapolate the $70.5 billion number through the fourth quarter, we get an estimated yearly fundraising tally for unicorns of $94 billion.
  • That figure is down by two-thirds compared to last year, around 4% since 2020 and 7% off of 2018’s fundraising tally.

The issue in front of us isn’t that we’re seeing something new; unicorn fundraising has dipped in the past here and there. But coming off of a record year for late-stage financing, seeing 2022’s results fall under prior years — when the number of unicorns that needed feeding was far smaller — indicates that the downturn in unicorn fundraising is more than just a blip. It’s a dramatic curtailment of capital availability for private-market companies that often featured the largest, and therefore most expensive, burn rates.

A seed-stage company might run six-figure monthly deficits. An early-stage company may burn more. Hell, we heard about midstage startups torching eight figures on the regular during the boom. Unicorns, being the largest, most expensive and best-funded private companies, likely topped the burn charts. So with their allowance docked this year by 66% compared to 2021, provided that our forecasts hold up and more hands reaching for fewer chips, it looks a bit like the Hunger Games out there.

Do not expect exits to solve the mess. They will not. IPOs are not set to really get underway until later in 2023, based on what we’re hearing and M&A won’t make a material impact on the unexited unicorn tally. Short of a fundraising renaissance for unicorns, the company cohort appears set to enter starvation mode.

There is some hope that venture investment will accelerate in Q4, but compared to prior periods, even an uptick won’t do that much.

More layoffs, then, to cut burn? More mergers of “equals” to cut overlapping cost centers? Private equity activity to snag smaller players and smush them into something with market heft? We don’t know, but if you were looking for a reason to have optimism that the unicorns are all right, we cannot find it.