TLDR: So Long, Unicorns. Hello, ZIRPicorns?
Aileen Lee, co-founder of Cowboy Ventures, has coined the term “ZIRPicorns” to describe startups that have not raised money since the zero-interest rate period and whose valuations are likely inaccurate. Lee states that 40% of US unicorns are trading below $1 billion in the secondary markets, significantly lower than their last fundraising valuations. She predicts that more companies will shut down as investors become increasingly cautious. Despite this, she expects the unicorn club to grow to 1,400 over the next decade.
Key Points:
- 40% of US unicorns are currently trading at valuations below $1 billion in the secondary markets.
- Aileen Lee predicts more companies will shut down due to inaccurate valuations.
- Capital efficiency has declined while the amount of capital invested in private tech has increased over the last decade.
- The unicorn club is expected to expand to 1,400 over the next 10 years.
In a blog post celebrating the 10th anniversary of the term “unicorn,” Aileen Lee, co-founder of Cowboy Ventures, discusses the current state of unicorn startups and raises concerns about their valuations. She mentions that 40% of the 532 US unicorns are currently trading below $1 billion in the secondary markets, indicating that their valuations are likely inaccurate. This is a significant difference from their last fundraising valuations, which have contributed to the aggregate value of all unicorns being $1.5 trillion. However, Lee argues that the real value is much smaller due to these lower trading valuations.
Lee also expresses her prediction that more companies will shut down next year as investors become more cautious about “catching a falling knife.” This suggests that investors are growing skeptical about the accuracy of unicorn valuations and are less willing to invest in them. She points out that the amount of capital invested in private tech has exploded over the last decade, but capital efficiency, measured by the current valuation divided by the private capital raised, has declined. This implies that the value of these startups is not proportional to the amount of capital they have raised.
Despite these concerns, Lee still expects the unicorn club to expand significantly over the next 10 years, reaching 1,400. This indicates her belief that the number of startups with billion-dollar valuations will continue to increase, even if their valuations may be overinflated. Overall, the blog post highlights the challenges and uncertainties surrounding unicorn valuations, suggesting that the term “ZIRPicorns” may become more relevant in the future.
