Open Forum

Ten years ago, Aileen Lee, the founder of seed stage VC firm, Cowboy Ventures, studied the characteristics of VC-backed companies. In the 2013 report, “Welcome to the Unicorn Club,” Lee coined term “Unicorn” to describe those privately held startups with a $1 Billion or greater valuation. Unicorns were off to the races.

Now, ten years later Aileen Lee and her “Cow-lleagues” have taken another deep dive into VC-backed startups. They have just published, “Welcome Back to the Unicorn Club: 10 Years Later.” And, yes, after a pandemic and years of near-zero interest rates, things have changed. The slide version of the report is 54 slides long, mostly graphs. Here I provide a four chart teaser of the gems in “10 Years Later.”

The Unicorn Club in 2013

It all famously started in 2013 with 39 unicorns, out of thousands of companies analyzed. Consumer companies dominated at 80% of the value of analyzed companies. Facebook eclipsed the others at $121B valuation. Facebook was the sole Superunicorn, defined as over $100 Billion valuation. Watch this data point: Enterprise Capital Efficiency was stellar at (26X).

Unicorns Grew from 39 to 532 in a Decade

Fast forward to 2023. Unicorns grew by 14X to 532. Consumer flipped in value with Enterprise with Enterprise now at 78%. There are 15 Superunicorns, over $100B. OpenAI leads the herd. Ten years later only 7% of the pointy headed beasts have exited, down from 66% ten years ago. Enterprise Capital Efficiency went off a cliff, from 26X to 7X. There is much more about ECE to dig into in the report. Here’s a not-so-fun fact, “60% are what we call ‘ZIRPicorns’ – they were last valued between Jan 2020 and March 2022, when interest rates were near zero and multiples at peak.” ZIRP, refers to Zero Interest Rate Policy – money was low-cost and company valuations were high.

The Deeper Story: Papercorns and ZIRPicorns

While there are 14X as many Unicorns as in 2013, 93% of the Unicorns are “Papercorns,” which have not exited. That is, their value is on paper only, not substantiated in the recent marketplace.The chart shows that as the cost of money increased, the number of new Unicorns decreased precipitously. ZIRPicorns make up 60% of today’s Unicorns. ZIRPicorns were last valued between January 2020 and March 2022 when public multiples were at their peak and interest rates were near zero. Their challenge: raising funds or M&A, which in many cases will involve a down round. Cowboy Ventures writes that they expect abrupt shutdowns in 2024. They also write that there are many healthy Unicorns which will grow larger.

NYC Up, SF Down (As a Percentage)

While the SF Bay Area grew in number of Unicorns, it lost in percent of companies based there. NYC climbed from 11% to 19%. Cowboy Ventures offers that COVID effects likely played a role in the wider distribution of Unicorns.

What Did Not Change Very Much?

Take a wild guess. If you guessed gender diversity, you are correct. Cowboy Ventures generously says, there is “LOTS of opportunity to increase diversity in founding teams.” In ten years, the number of startups with a female co-founder has grown from 5% in 2013 to 14% in 2023.

“There are more founders named Michael, David and Andrew than there are women unicorn CEOs. At this rate, we won’t reach equal gender representation until 2063,” per Cowboy Ventures.

Fellow data-lovers there is much more in “Welcome Back to the Unicorn Club: 10 Years Later.” I recommend the further data on Enterprise Capital Efficiency.

Let me know which data appealed to you.

-Maureen