What a difference two years can make. The herd of private technology start-ups worth over US$1bn — dubbed “unicorns” — is looking decidedly skittish. Funding is drying up and the expected rivers of revenue have not yet begun to flow. On Friday, Quartz pointed out that there hasn’t been a single IPO in the first quarter of 2016. The last time that happened was in the worst quarter of the Great Recession — Q1 2009.
Compare that to Q3 2014 in which there were 10 IPOs worth more than $27bn.Granted, that quarter was distorted by one of the biggest IPOs in history, Alibaba, but the number of IPOs has rarely dipped below five per quarter and a value of more than $1bn since 2009.
This complete freeze may just be a blip, or it may signal a deeper malaise. My money is on the latter. When I first read the Quartz headline, my gut reaction was: “Sure, but unicorns intentionally steer clear of IPOs.” Listing is no longer the only way to raise capital, and having big public investors obsessed with quarterly performance can harm a company’s long-term growth plans. Staying private gives unicorns the kind of autonomy that a listed company usually (with some rare exceptions) cannot maintain.
The problem is that the other source of funding that unicorns have been living off — private venture capital — has begun to dry up at an alarming rate. VC funding fell by 30% in the last quarter of 2015 compared to Q3. Again, this may just be a temporary dip, but the performance of some of the highest profile unicorns suggests otherwise.
Evernote is apparently struggling to maintain its membership in the $1bn-plus club. As revenue numbers have disappointed, it has been shedding employees and trimming perks. Many of its best people are being stolen by other unicorns.
VentureCanvas 