Unicorns find themselves captives of the private markets, as continuing low exit activity spans companies large and small.
Why it matters: At the current pace, it would take more than 49 years for every U.S. unicorn to generate an exit, Crunchbase calculated in May.
By the numbers: Aging U.S. unicorns are currently worth about $2.5 trillion. Nearly 40% of those companies have been held in a portfolio for at least nine years, dragging IRRs and holding back distributions, according to PitchBook and NVCA.
- On the final day of Q3, Cerebras Systems, a Sunnyvale, Calif.-based AI chipmaker, registered for an IPO that could raise an estimated $600 million.
- A significant listing, it comes at the end of a quarter when just 14 companies went public, with final exit value for the quarter reaching $10.4 billion, per PitchBook and NVCA.
What they're saying: A report from Bain & Co. found that the pace at which unicorns grow into a household name has slowed significantly.
Between the lines: Ten U.S. unicorns have not raised financing since 2020 or earlier, per PitchBook data, with the longest fundraising gaps being:
- Pat McGrath Labs, a New York-based makeup brand that raised $60 million in July 2018, valued at $1 billion.
- Away, a New York-based luggage startup that raised $35 million in June 2020, valued at $1.45 billion.
- OfferUp, a Bellevue, Wash.-based peer-to-peer marketplace for local goods that raised $120 million and acquired competitor Letgo in July 2020, at a $1.02 billion valuation.
Reality check: Some of these companies have remained public because they can, having plenty of cash on hand from investors and operations. Other unicorns represent a lost generation.
What we're watching: M&A has picked up, but we need to see the IPO market come back to life to kick-start exits, especially by the companies sitting on significant private stakes.
