Few things were more coveted than unicorn status from about ‘16-‘21.  It was a sign you were one of the elite, and it made recruiting and so much more easier.

Stewart Butterfield noted how important it was for Slack at the time to become a unicorn — period.

Then things changed from mid-2020 to early 2022.  It seemed like everyone became a unicorn.  Hundreds of new SaaS unicorns were minted, sometimes as early as $10m ARR and in some cases, even earlier.

And now things are … different.  The biggest issue?  Many have nowhere else to go.

Today, the best late-stage deals are being done at 10x ARR, sometimes 15x ARR for the true break-out leaders.

Now, imagine you raised at a $1B valuation at $20m ARR, and fast forward to today, things are OK but not great.  You hit $40m ARR, but now are only growing 50%.  What are you worth?  Much, much less than $1 Billion.  Even if you are growing 100% annually, you probably aren’t worth $1 Billion.

That means most SaaS unicorns are unfundable.  Flat rounds and downrounds may be possible for some, but even there, it’s important they still are growing quickly and are capital efficient.

Most will now just have to make do with whatever capital they have now.  Then the question becomes … what next?

If a startup is sitting on say, a $1.5B valuation, it will need to sell for $3B, or IPO, to make its last investors a decent return.  Today, that might mean $300m ARR growing 40% or more.

You have to, in fact, be “better” than all the public SaaS companies below this line to be worth “just” $2 Billion … in the real world:

What about selling for less than the last round price?  It can be brutal, but can work out sometimes so long as you can still sell for 3x or more what you’ve raised.  

But many unicorns raised $100m-$200m when times were great.  There are few acquirers for $400m-$500m for most of them, let alone the $2B-$3B it would take for a clean 2x-3x return for the last round investors.

A long, long road for most unicorns.  Not all, but most.

It’s just kind of a mess in many cases.  Probably even most SaaS unicorns today, in fact.

I recently caught up with a great founder, doing really well, that just turned down an offer to invest at a $400,000,000 valuation.

Why?  They didn’t need the money, and as confident as they were in the business today and eight figures in high-quality ARR, they weren’t exactly sure they’d produce a $2B+ IPO or acquisition.  They believed it could happen, but they weren’t 100% sure it was the track they were on at the moment.  Close, but not quite at the moment. The management team was too new, a few more things hadn’t quite come together yet, despite strong traction so far.  So they just said No Thank You at any price to the growth round.

I was proud of them.




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