alt Hacker NewsZombie unicorns are haunting Silicon Valley
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Cameo (an example in the article) is an interesting one. It seems like a stable, steady business, making money, should be easy to accurately value if you have access to the financials. No surprise that the "It's $1bn!!!" valuation came from Softbank Vision Fund. https://en.wikipedia.org/wiki/Cameo_(website)
Companies being devalued is not news. It happens on the stock market everyday.
For companies that rely on outside investment to survive however it can become a slide to oblivion.
If the company itself is profitable, then typically it can continue. There's no interest rate on VC investment, and if profitable it can run forever. Customers, employees, users and so on are all fine. Investors? Well, they're potentially getting some returns through dividends, but its minor and not what they were chasing.
Of course the VC investment model is high risk. That's kinda the point. It's a bet on IPO or (valuable) acquisition. Most companies end up as neither.
Will this affect new VC funds in the future? Maybe in the short term. But there are still enough IPOs (like SpaceX now) and still enough greedy people willing to play the lottery. Sure the absolute amount of VC money may come down, but I don't think the model is going away.
Indeed it may start to lead to saner valuations along the way.
My impression is a lot of these companies raised mega rounds right before interest rates went up, and are now able to tread water by cutting headcount enough that their revenue + interest can sustain them. To what end? Who knows...
>By May 2026, 332 of the 1,900 unicorns in a database maintained by Ilya Strebulaev of Stanford University had raised money at a valuation at or below their peak (see chart). Of those, 212 were valued at under $1bn. As many as 383 had disclosed no new funding in the previous three years; 41 of these had lost unicorn status
332 out of 1900 isn't that bad?
Even the further 338 if confirmed would still be less a minority of the overall 1900
lol I work for one of these still. It was an auto ML product, so the company is desperately trying to pivot to Genai and agents. Trying to catch the wave. I don’t know how well it’s working though. Churn keeps happening in the core business, processes meant for a large corporation are slowing progress in developing the new platform, and leadership has churned till only west coast AI pilled Amazon alums are left.
Zero interest rates kept many weak companies alive but they also have give great companies time to find product market fit, and the hard part is to separate the two in hind sight
I was an early employee (#20-something) at a company that peaked at just over a billion dollar valuation during Covid and that now sits at somewhere between 1/2 and 1/3 of that depending on who you talk to.
I'm still really close with a lot of early employees and while I was lucky enough to have a liquidity event happen shortly after I left that allowed me to cash out for a decent, but not life changing, return, many of my friends were not.
One of the things I think a lot of people may not realize is how badly this zombiecorn state fucks employees with stock options. A lot of startups will give you a limited amount of time after you leave to exercise your stock options (90 or 180 days is common based on my experience). If you don't exercise your stock options and buy your stock within that time period the options expire and you get nothing. The problem is that if you buy the stock, you won't be able to sell until there's a liquidity event (usually a new funding round or IPO) and current investors don't want to take investment at a lower price unless they absolutely have to.
I know some other early employees who were laid off who had to make the choice between dropping $75k or $100k to buy stock that is worth 10x that on paper (even at the current valuation) and praying for a liquidity event that will probably never arrive or letting go of shares that just a few years before seemed like they would be a life changing amount of money. I know people who've done both and neither route leaves people feeling good about their decision.
I know common wisdom is that you should treat that stock like it's worth nothing until they day you sell, but when you've worked at somewhere for 5-10 years and seen the on-paper value of your stock rise to a life changing amount of money, I think it's hard not to assume that you'll be able to cash that out one day.
This will only get worse as the AI bubble pops or cools and generates a ton more AI zombicorns too.
It really sucks for employees as their equity stake gives reason to stick around if there’s a good exit, but as every day passes odds increase that either the company goes bust or gets sold in some aqui-hire or salvage sale that gets investors something back but tends to leave employee shareholders with nothing.
There are post IPO tech zombies as well. Companies that IPOed and aren’t at serious risk of bankruptcy as they have cash, but aren’t profitable and nothing they seem to do changes the trajectory of the company. They could coast for years to come just slowly burning cash but have no clear prospects either to be anything more than a has-been just coasting along the train of irrelevance.
Why post a link that people have to pay to read?
Same article:
https://www.businesstimes.com.sg/opinion-features/zombie-uni...
Zunicorn
Zune-icorn?
Zombicorn!
I know of some actual in use Microsoft Zune that have outlasted many companies that were predicted to become unicorns.
It's simple really. If the VC's don't move the money, then it's dead money to them. These are calculated risks that they absorb under the premise of regret minimization. They don't really have a choice but to take occasional losses. It's nearly intentional.
2015 era VC isn't aging well
Quick warning that finance bros call any healthy company that isn't on an extreme growth path "zombies". In VC eyes they're "undead" because that big fat exit is not likely to come, but actually in reality many of these are perfectly healthy companies doing fine. The journalist who wrote this clearly walks in the same circles cause they're happy to call healthy companies that are alive and kicking, serving their customers, creating jobs and so on, "zombies".
That's not to say that surely there's also plenty of once-unicorns which really are borderline bankrupt, and that lots of these companies were extremely overvalued and VCs made bad deals in the ZIRP. But the term "zombie" is a derogatory anti-entrepreneur term invented by VCs who try to encourage founders to "go big or go bust", quietly disregarding the huge incentive mismatch they got. Because unlike the VCs, the founder has all their eggs in one basket.
Falling valuations spell horror for vcs. More recently launched funds have been returning markedly less money to investors than those of earlier vintages, according to the World Economic Forum. They have also underperformed the s&p 500 by a wide mark, particularly those that did not invest in a small club of artificial-intelligence superstars
If you think it's haunting Silicon Valley, wait til you see what's on the balance sheets of Private Equity, which holds these and many, many more overvalued companies!
So, series h, i, j companies are worthless?
children of the zombie corn
They should be measuring valuation inflation and the Fed should intervene to prevent the debasement of VC
We need to stop pretending the VC valuations are meaningful.
It's like asking someone playing roulette to value "13 black", after they bet on it.
There valuations are always based on expectations of huge growth, not current value. Growth predictions with an extremely low confidence level. VCs make up for it by making a lot of bets.
The companies NEVER have current profits (The actual measure of value) that would justify their valuation.
So, it's comparing gambling payouts to corporate valuations, aka "apples to oranges", which are not related.
When the predicted growth doesn't occur, the companies valuation becomes based on its actual value (profits).