Early-Round Unicorns Still Being Minted Despite Market Pullback

Even with a drop in venture funding and slashed valuations, early-stage companies are still being minted as unicorns at a breakneck pace.

Last year saw a record 109 companies reach unicorn status after an early-stage funding round—defined as seed, Series A or Series B, according to Crunchbase data. This year has offered a very different environment for raising venture capital, yet there has been almost no drop in that record pace, with 50 early-stage unicorns minted in the first half of the year.

While this year’s pace is slightly slower, it is worth noting that out of the nearly 600 new unicorns minted last year, early-stage unicorns made up about 18%. This year, of the 237 unicorns created in the first half, 21% were created after an early-stage round.

This year also still far outpaces those years before 2021, which normally witnessed only a few dozen such companies minted so early in their fundraising exploits. 

While there has been a pullback in venture funding—especially in later-stage growth rounds— the early-stage unicorn numbers seem to indicate there is still a strong appetite among investors for young companies with high valuations if they believe in the business model.

Crypto’s impact

Not surprisingly, crypto startups led the way when it came to minting new unicorns at the largest valuations. The three biggest valuations to create new unicorn startups all went to the crypto space:

• Seychelles-based KuCoin closed a $150 million Series B in May at a $10 billion valuation, minting it not just a unicorn but a decacorn.
• San Francisco-based FTX US raised $400 million in January at an $8 billion valuation.
• Binance.US—the American franchise of Binance—raised more than $200 million in a seed round in April at a pre-money valuation of $4.5 billion.

Others in the cryptocurrency space such as Miami-based Yuga Labs and Hong Kong-based Babel Finance also were minted as unicorns this year after early-round financings.

However, that is not to say it was only early-stage crypto-corns to join the herd, as others such as New York-based fintech startup Clear Street, San Francisco-based cybersecurity firm Vanta,

San Francisco-based job portal company AngelList Talent, and Austin-based construction tech startup ICON all became unicorns with valuations of more than $1.5 billion after Series Bs in the first half of the year.

Money and trends

Although the numbers would seem to point to a very robust venture market with so many young—at least in terms of funding—unicorns, there are some signs of possible concern.

The first half has started off strong for early-stage unicorn creation, but the second quarter minted only 20 compared to the first quarter’s 30.

Plus there could be a more substantial drop in the second half of the year if crypto continues to stumble. Funding numbers in the sector have fallen in the last two quarters, per Crunchbase data. If that trend continues and less venture money comes to startups in the sector, fewer new unicorns will be minted—especially in early rounds of funding.

The numbers also illustrate a drop in valuations, even for these upstart unicorns. Last year, early-stage unicorns had a total post-money valuation of $212.6 billion, according to Crunchbase. Through the first half of this year, the total valuation of the 50 unicorns created had a post-money valuation of $88.1 billion—slightly behind 2021’s pace.  

Total funding also lagged compared to last year. This year’s crop raised about $7.4 billion in total for the rounds that minted them unicorns. Last year, the total amount for rounds that minted early-stage unicorns was $9.1 billion in the first half of the year and $27.3 billion for the entire year.

Nevertheless, while the numbers may be off of 2021’s highs—which was a year unlike any before—numbers for early-stage unicorns are well ahead of any previous year.

Even in the midst of a venture pullback, it appears investors are still willing to bet big on a young startup if they like what they hear.

Illustration: Dom Guzman

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