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Freshly Minted Unicorns Now a Rare Sighting In Silicon Valley (qz.com)
An anonymous reader shares a Quartz report: Unicorns, start-up companies valued at over $1 billion each, once a rare sighting for investors, have frolicked across Silicon Valley of late. Now the market seems to be yanking on the reins. Venture capital research firm CB Insights reports the number of venture-backed startups achieving a $1 billion or more valuation ground to a halt over the last six months. In the first quarter of 2016, only five new unicorns arrived. That's compared to an average of about 20 per quarter last year. The number of startups worth at least $1 billion has doubled since 2015 to more than 160, says CB Insights. At the same time, the number of such companies accepting "down rounds" or exits with lower valuations is now up. That number exceeded the quantity of new unicorns being created starting in the last quarter of 2015.
In case anyone else was wondering, a unicorn is a start-up company valued at over $1 billion.
https://en.wikipedia.org/wiki/Unicorn_(finance)
Make it your habit to explain inside terms and acronyms when submitting summaries, please.
A unicorn in venture capital is a company that reaches $1B in valuation, either in the run up to and/or after the IPO.
Most unicorns aren't. Think of the following car analogy deal. Suppose I sell you car for $10K, but we add a clause saying "a long time ago I lost a valuable engagement ring in the car. If found the sales price goes up to $100K".
Would you think it legit if I were then to turn around and issue a press release announcing that I just sold you car for $100K?
Similarly with unicorns nowadays, presently they all have this clause that if their business turns out not to be very successful (which is the case in 9 out of 10 startups) the VC ends up owning the whole thing and hence the price was actual cash exchanged (usually around $200-400 million). Then there is a clause saying that in the unlikely event that the company turns out to be wildly successful (i.e. the ring is found), then said $200-400M gets the VC only 20%-40% of the company.
Companies have announced these deals via press release declaring themselves to be worth a billion dollars and thus a unicorn. This is a misrepresentation of the facts, and indeed if the company had to be valued, say for the purposes of a divorce (not that this happened to me :p ), the probabilities of each outcome would be considered and the company would be given a sub-unicorn valuation.