Unicorns are going through a birth crisis with figures similar to the time when their presence was only beginning to gain ground in the market. The creation of these technological companies valued at more than 1,000 million is in low hours.
According to data from the first quarter, only 18 startups won this title worldwide, compared to 153 in the same period of 2022 or 119 in 2021. It is a result that is practically at the level of the first quarter of 2017. , according to data collected by the consulting firm Pitchbook. “We are facing a stage of correction after the investment euphoria of the pandemic years and low interest rates. Investors have instituted caution in the face of an unfavorable global context," says Jaime Novoa, partner of the K-Fund investment fund.
As the chart shows, the landscape for startups has changed virtually overnight. Coinciding with the war in Ukraine and the exorbitant inflation in the large developed economies, the birth of new unicorns began to subside in the middle of 2022 and the results worsened with the rise in interest rates, the fall in the stock markets and the crisis in consumer demand.
"The era of easy money is over and for this reason, now operations are analyzed under a magnifying glass and profitability is prioritized over growth," says Jordi Vidal, investor in the Kibo Ventures fund.
It is symptomatic that many technology companies have carried out massive layoffs due to the demands of investors. And also that large companies that at the beginning of 2022 were on the crest of the wave have adjusted their valuations significantly downward. Among the most recent cases, Stripe stands out, a payment processing platform that has seen its value fall by half in the last round of investment, going from 95 to 50,000 million dollars. Or also from Klarna, the Swedish installment payment giant, whose valuation has plummeted 85%, going from 46,000 to 6,700 million.
Among the venture capital funds there is reluctance to use the word bubble to designate the euphoria experienced in 2021 and part of 2022 "It is a very ugly word," Vidal acknowledges, although at the same time he assures that many operations that were closed in that period They didn't make sense and now the market is reaping the benefits. “Currently, the situation is healthier for both investment funds and entrepreneurs. Business viability is better analyzed and meaningless valuations are not carried out. So we have returned to a more normalized situation,” says Novoa, who admits that during the pandemic months, valuations of up to 100 times sales were attributed when now the multiples are between 6 and 15 times, following trends on the stock market.
How long will the situation last? It is a question that no one can answer for sure. According to Vidal, it will last throughout 2023 and prudence will even last into 2024. “Startups will have a hard time raising money and they won't be too interested in that either since their valuation will be low and the money they will get will be more limited. In fact, if a year ago they raised money to spend in one year, now the term is extended to two years”. On the other hand, the funds, which say they have no difficulty in continuing to raise money, have before them an opportunity to invest at a good price.
