Crunchbase News by Gené Teare –– Funding to the unicorn class of companies — those private startups valued at $1 billion or more — has fallen dramatically in 2023, to around 25% of what it was in the 2021 market peak, an analysis of Crunchbase data shows. So perhaps it’s no surprise that investments by leading investors in unicorn companies have dropped precipitously in 2023. For this analysis, we look at the nine most active venture and growth investors globally who have racked up the most investments in unicorn companies since 2018. We found that investments are mostly in the single digits this year for the most active investors in this asset class. These nine invested in a total of 44 unicorn companies in 2023 — or 13% of all unicorn companies that raised funding in the private markets this year. In 2022, they invested in 213 companies, or around 28% of unicorns funded that year. In 2021, that number was 471 companies, or 30% of this asset class. This slowdown is an indication of just how much this investor class has shifted its aperture in the past year.

Looking back

For the three most active investors — growth stage investors Tiger Global, Coatue and the SoftBank Vision Fund — investment counts in 2021 were up almost 3x or greater from 2020, as these firms made bigger bets as the IPO market for technology stocks took off in 2021. For the multistage venture capital firms that were the most active — Andreessen Horowitz, Accel, Lightspeed Venture Partners and Index Ventures — along with growth investor Insight Partners, investment counts were closer to doubling in 2021 compared to 2020. These firms tended to invest earlier in companies and kept investing through the growth in venture markets. Sequoia Capital was the single firm on this active list of investors in unicorns that increased its investment pace, but did not double year over year from 2020 to 2021.

2024 slowdown

Growth investors are the most exposed due to the large dollar amounts these firms invested at and high valuations. Tiger Global amassed the largest current private unicorn portfolio based on an analysis of Crunchbase data, currently numbering over 200 portfolio companies. But this year, the firm has reportedly sold stakes, amid write-downs. The venture capital investors are less exposed as they typically invest in companies earlier, but have had to nonetheless rescale the value of these portfolio companies, and scale back their exit expectations. Meanwhile, the unicorn board keeps growing as even the slow pace of new unicorn additions outpaces even rarer exits. In 2024, we expect to see a winnowing of the unicorn ranks as some companies shutter, others are acquired and, in the best-case scenarios, ascend to the public markets. And some companies might still be able to raise funding, albeit at lower values.