Unicorns 'fall from grace': When the billion-dollar illusion fades away

DNVN - Once considered legendary figures in the business world, unicorn startups (valued at over $1 billion) have exploded in number over the past decade. However, after a while, a series of unicorns are "falling from grace," disappearing, or barely surviving in their own shadow as cheap money dries up.

Illustrative image. Photo: Internet.

From legend to bloated "cattle herd"

The term "unicorn" was first coined in 2013 by Aileen Lee, founder of Cowboy Ventures, to refer to the rare tech startups that reached a valuation of $1 billion. At the time, there were only 39 such companies, reflecting the mythical and rare nature of the name.

However, more than a decade later, the picture has completely changed. By 2025, the number of unicorns globally had exceeded 1,200 companies, an increase of approximately 26 times. This boom was driven by abundant venture capital, low interest rates, and excessive market optimism during the period of 2013-2021. Notably, 2021 saw a large number of unicorns emerge as interest rates neared zero and the world became heavily reliant on technology due to the pandemic.

The increase in quantity doesn't equate to quality. A 2023 report from Cowboy Ventures indicated that 60% of unicorns were "ZIRPicorns" (Zero Interest Rate Policy Unicorns) – companies that achieved billion-dollar valuations during the zero-interest rate period (2020-2022). As cheap money dries up, many of these companies are at risk of running out of resources.

More seriously, 93% of unicorns are considered "Papercorns"—companies with high valuations on paper but not actually worth $1 billion. Approximately 40% of these companies trade for less than $1 billion on the secondary market, indicating that their actual valuations are significantly lower than their glamorous titles suggest.

The painful fall from the horse and the disappearance.

The "downfall" of unicorns has begun to emerge, characterized by a combination of factors reshaping the startup valuation landscape, investment strategies, and market dynamics. Investors are no longer embracing "growth at all costs" strategies; instead, they are prioritizing valuation validity, the path to profitability, and the sustainability of the business model. This shift in preferences, coupled with rising interest rates since 2022, has left many unicorns in dire straits.

Many once-famous names have collapsed or been forced to sell themselves for rock-bottom prices. Notable examples include WeWork and Theranos. These serve as cautionary tales about uncontrolled growth in business models.

Becoming a unicorn too early can actually be a "curse." The pressure to maintain high valuations while having weak fundamentals leads to poor results. Forecasts suggest that the current unicorn population could shrink from over 500 to around 350 companies in the coming years through closures or revaluations.

Capital utilization efficiency has seriously declined. Previously, companies generated returns 26 times their invested capital; now, that figure is only around 7 times. This makes investors hesitant to inject more capital to rescue these struggling "zombie" companies.

The collapse of unicorns is not just the end of an economic cycle, but also the beginning of a new entrepreneurial mindset. Entrepreneurs are shifting from chasing glamorous titles to focusing on solving real problems and building resilience.

Alternative funding models such as self-funding or revenue-based funding are gaining popularity, helping founders maintain control and achieve sustainable growth without the pressure of a billion-dollar valuation.

Although the era of "easy money" is over, truly capable "super unicorns" like OpenAI and SpaceX continue to thrive. However, for the rest of the "unicorn flock," the harsh weeding process has only just begun. Companies that cannot demonstrate real value will be forced out, making way for a more practical, disciplined, and sustainable startup ecosystem.

Binh An (Compiled)

Source: https://doanhnghiepvn.vn/cong-nghe/ky-lan-nga-ngua-khi-ao-anh-ty-usd-tan-bien/20260120081007725