Unicorns in Crisis: Why Stagnant Growth is Haunting High-Valuation Startups

Hot Take:

Unicorns may have glitter, but some are definitely more “My Little Pony” than “Black Stallion”. When the sparkle fades, the secondary market can be a unicorn’s best friend—or worst enemy.

Key Points:

• Shareholders in rapidly growing startups like Figma, Databricks, Canva, and Scale AI are cashing out through secondary rounds.
• Stripe saw a 35% increase in revenue in Q3, allowing investors to exit via Sequoia Capital’s arrangement.
• Google might buy Wiz for $23 billion, rewarding its investors due to its impressive growth.
• Nearly one-third of unicorns had revenue growth of less than 20% last year.
• High valuations from 2021-2022 are causing headaches for venture capitalists as growth slows.

Unicorns Cashing Out: The Glittering Few

Even with the IPO market taking a nap, some shareholders of high-flying startups are still living the dream. Thanks to secondary rounds, investors in fast-growing darlings like Figma, Databricks, Canva, and Scale AI are laughing all the way to the bank. And let’s not forget about Stripe, which apparently had a growth spurt and saw its revenue balloon by 35% in the third quarter. Thanks to Sequoia Capital’s clever arrangement, Stripe’s investors are cashing out like it’s Black Friday.

Google’s $23 Billion Shopping Spree

Then there’s Wiz. If Google decides to go on a shopping spree and spends a whopping $23 billion on the cybersecurity startup, its backers will be popping champagne like they just won the lottery. The reason? Wiz’s annual recurring revenue skyrocketed five times in just two years. Forget cybersecurity; these investors need to start teaching classes on money magic.

Slow and Not-So-Steady: The Unicorns Stuck in Traffic

But not all that glitters is gold in Unicorn Land. A new study by Industry Ventures reveals that nearly one-third of private unicorns had a revenue growth rate of less than 20% last year. Talk about a buzzkill. These companies are like the tortoises in a race full of hares, and it’s making venture capitalists sweat bullets.

High Valuations, Higher Expectations

Why all the sweating? Because these unicorns raised money at sky-high valuations in 2021 and 2022, with venture capitalists betting on everlasting growth. Now, with growth slowing down, they’ve got a problem bigger than a unicorn in a china shop. Slow growth is like the kryptonite for these once-high-flying startups, threatening to turn their glitter into dust.