Value of the 100 biggest unicorns falls by $10 billion

A new study from PwC suggest that the 100 most prominent unicorns in global business attracted $10 billion less from investors in 2023 than the last year. Amid a ‘challenging macroeconomic environment’, the researchers suggested that investors were being more cautious with which firms they backed – and focusing more intently on profitability than previously.

In business, a unicorn is a privately held startup company valued at over $1 billion. The term was first published in 2013, coined by venture capitalist Aileen Lee, choosing the mythical animal to represent the statistical rarity of such successful ventures – and has since been applied relentlessly to heavily hyped new businesses in every conceivable sector – often promising to leverage a vague suite of ‘digital’ tools and experiences to disrupt industry incumbents.

The material reality of this hype is often very different to the transformative stories sold by unicorn valuations, though. Providing services that consumers value to the extent they will spend billions on them is very different to being valued with a $1 billion dollar price tag ahead of an IPO. More often than not, for all the metrics deployed to justify them, market capitalisation prices for the total value of all a company's shares of stock reflect little more than a wild guess as to what said traders would do to a company given the chance – and are as definitive as the odds available to punters at a bookmakers.

Most famously, perhaps, the unicorn WeWork achieved unicorn status in 2014, as a start-up valued at $4.6 billion. But after a decade of failing to deliver an actual profit, it collapsed in ignominy in 2023. Studies suggest it is not an exception, either.

Illustrating this, a paper in 2020 found that only six unicorn startups out of 73 were actually profitable. After starting life boasting of their huge potential during IPOs that raked in huge price-tags that added up to a collective $1.9 trillion, most of the firms soon saw their value bump back to Earth, leading to significant problems for investors.

Now, a global study from PwC has shown that the world’s 100 largest new unicorns are attracting smaller valuations, as investors become increasingly wary of what such allegedly disruptive start-ups can actually deliver. According to the ‘Global Top 100 Unicorns report’, the aggregate value of the Top 100 Unicorns stood at $2,001 billion compared to $2,012 billion the year before.

Katrina Hallpike, valuations partner at PwC UK, said of the findings, “Given the challenging macroeconomic environment and the decrease in volume of venture capital funding rounds in 2023, investors are increasingly focused on the path to sustained profitability alongside top line growth. With many businesses reluctant to raise down equity rounds, we are seeing a rise in alternative funding structures such as convertible loan notes and increased liquidation preferences, alongside businesses looking to delay their next fundraising. There is still an appetite for quality however and we are seeing growth businesses with strong fundamentals continue to achieve attractive valuations.”

Spread across the selection of firms, the research also found that the valuation threshold to enter the Top 100 Unicorns fell by $0.2 billion to $7.4 billion in 2023 – in line with the overall decline in the valuation of Unicorns. Overall, the total number of unicorns globally rose by 104 from 1,281 in 2022 to 1,385 in 2023. There were ten new entries into the top 100 this year, while of last year’s pick, two companies exited the list following their respective IPOs – and the same number simply ceased operations. 

Kat Kravstov, capital markets director at PwC UK, added, “Only a few new entrants made it to the top 100 unicorns list this year and, whilst the broader market conditions did not help, arguably the current challenging macroeconomic environment has helped to flesh out the desirable characteristics of a successful unicorn. Going back to basics with key ingredients of success being the disruptive nature of the product or service, often technology powered, and a business that is fit for sustainable growth.”