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There are now so many of them that some are suggesting the term only apply to $10B companies
If 2015 represented the last gasp of the unicorn, before venture capital finally came to its senses and stopped stuffing these companies full of money, then, man, did they go out in style.
This past year saw more companies reach $1 billion valuations than any year in history, according to dataout from PitchBook on Tuesday.
There were 47 new unicorns in the U.S. alone, for a 38 percent increase over 2014. There were also 28 new unicorns outside of the U.S., a 100 percent increase over the 14 from last year, for a total of 78. That equals 1.5 new unicorns every single week for the year.
Unicorns were pretty rare until 2013, as you can see in the chart below. The numbers were pretty consistent, with only five new ones in the United States for a few years, and sometimes none abroad, before they absolutely exploded.
In all, almost $33 billion was invested in unicorns this year, with the median deal size of $158 million. There were six deals of at least $1 billion, and a few of those were in Uber alone.
There are now so many unicorns that the name has become, essentially, meaningless. As Reid Hoffman put it, "Indeed, if the unicorn is by definition the rarest creature in the universe, how can there be a herd of them? Talk about an ontological oxymoron."
PitchBook even suggest that we up the ante, and start using the term only to apply to companies that have valuations of at least $10 billion, like Uber, Snapchat or Airbnb.
All of that hand wringing might be for naught, though, as it seems like investors are becoming wary of companies with unicorn status, especially since they've started to bring in diminishing returns.
A report from Battery Ventures showed that 40% of unicorn IPOs since 2011 are now under pre-IPO valuation. Companies in 2003 were seeing returns of over 6 times pre-IPO valuation, now it's less than two times their value.
So what did those investors do to make sure they didn't get burned? They decided to downsize their investments.
Fidelity, for example invested in Snapchat's $538 million round this past May, which valued the company at $15 billion, a round that made Snapchat the fourth most valuable private company in the United States, behind Uber, Airbnb and Palantir. Then, earlier this moth firm decided to write down the value of its stake by 25 percent, dropping it from $13.9 billion to $10.4 billion.
The firm also cut the value of its shares in Zenefits by 48 percent, and marked down the value of its share in Dataminr by 35 percent.
The same thing happened to Dropbox earlier this year, when of its investors, BlackRock, cut its estimate of the company’s per-share value by 24 percent.
Fidelity knows a little something about unicorns, having invested in 20 of them, tied for first place with Sequoia Capital and Andreessen Horowitz, according to PitchBook. SV Angel made 17 such investments, while Kleiner Perkins and T. Rowe Price each made 15.
(Image source: tranquilwaters.uk.com)
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