tech
AI crushes startup valuations for pre-ChatGPT companies
More than 220 former unicorns have lost their billion-dollar valuations as the AI boom redirects venture capital toward a handful of companies. PitchBook data shows startups that last raised in 2021 are worth 68% less on average, with SaaS firms the largest casualty class.
TL;DR
- Over 220 former unicorns have lost their billion-dollar valuations.
- Startups that last raised in 2021 are worth 68% less on average.
- SaaS companies are the largest casualty class, with 75 firms on the fallen unicorn list.
- Venture capital has overwhelmingly shifted to AI startups, with a few mega-deals accounting for the majority of funding.
- Pre-ChatGPT startups face existential challenges as investors prioritize AI-native firms with much higher growth rates.
- Generative AI threatens the value proposition of traditional SaaS products.
- Fallen unicorns are unlikely to raise new rounds without punishing down rounds and cannot go public without a credible AI story.
- Acquisition at a significantly lower valuation is the most likely exit for many.
- Pivoting aggressively into AI is a potential survival strategy, but requires scarce resources.