Early-Stage Unicorn Growth Slows Down in 2023

It’s getting harder and harder to be a young unicorn in the slowing venture market.

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With overall unicorn numbers way down — fewer than 100 joined The Crunchbase Unicorn Board in 2023 — the number of new early-stage unicorns has also dropped off significantly. Only 29 unicorns were minted last year after an early-stage funding round — defined as seed, Series A or Series B — an analysis of Crunchbase data shows.

That’s the lowest total since 2019 and a 62% decline from 2022, when 77 early-stage unicorns were minted. It’s also a steep 73% drop from 2021, when 107 such unicorns were created.

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Slowing pace

While the number of early-stage unicorns declined last year, it apparently got even more difficult to grow that horn as the year went on. While18 young unicorns were minted, only 11 got their horns — or $1 billion or more valuation — in the second half of the year.

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Many that did get minted last year were — surprise! — AI related.

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A quick look at the data reveals more than a third of all early-stage unicorns minted last year were related to generative AI in some way. Those include:

• Character.ai, which in March closed a $150 million Series A at a $1 billion valuation led by Andreessen Horowitz.
• Adept AI, which also in March raised a $350 million Series B led by General Catalyst and Spark Capital at a reported post-money valuation of at least $1 billion.
• CoreWeave, an AI cloud infrastructure company, raised a $200 million Series B extension in May from Magnetar Capital — just weeks after the startup raised $221 million — that valued it at $2 billion.
• In June, Typeface raised a $100 million Series B led by Salesforce Ventures  at a $1 billion valuation. The company’s AI platform helps with enterprise content creation such as product shots, blog posts, social media ads and job posts that meet brand specifications.
• In October, China-based generative AI startup Baichuan raised around $300 million in a Series A from investors including Alibaba and Tencent at a $1.3 billion valuation.
• In September, Germany’s Helsing, an AI-enhanced defense tech company, raised a Series B round worth approximately $225 million at a $1.8 billion valuation.
• In December, Paris-based Mistral AI, an OpenAI and Anthropic competitor, reportedly raised approximately $415 million in a round led by Andreessen Horowitz and Lightspeed Venture Partners that valued the company at $2 billion.

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What it means

With the general decline in unicorns being minted, it is not shocking to see fewer unicorns getting minted early on in their funding lives.

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Most companies are seeing their valuations significantly sliced — Bolt’s valuation reportedly just fell from a high of $11 billion to just $300 million — so young companies early in their funding years are unlikely to garner the high, perhaps unwarranted, valuations many did just a couple years ago.

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Many investors are looking more deeply into companies’ financials and eyeing cash flow, profitability and sustainable growth — metrics not usually associated with companies still in the seed and early series funding range.

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However, investors do seem eager and willing to still affix high price tags to all things AI — even to young companies still finding their place in the market.

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Perhaps it is because AI is a truly transformative technology that will lead to one of the biggest shifts in history — or maybe they just haven’t learned from past mistakes.

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Reference: https://news.crunchbase.com/ai/early-stage-unicorn-count-ye-2023/