The New Normal for Unicorns: Fewer Raises, Tougher Rounds

The VC and startup world is buzzing about AI, the lack of exits, and the rise of tenders and secondaries. But under the radar, many startups that thrived during the boom years are now struggling to stay afloat.

While hot startups like Stripe, Databricks, and Anduril make headlines with massive tender offers, and AI giants like Anthropic and OpenAI raise at sky-high valuations, a different story is unfolding for everybody else. IPO hopes flicker with Coreweave and MNTN on deck, but many once-celebrated unicorns—like Outreach, Gong, and Carta—have been stuck at their 2021 valuations, waiting for the right moment to move.

According to Carta, startups are taking longer to raise new funding rounds. The median time between Seed and Series A, A and B, and B and C has stretched beyond two years, up from less than 18 months in 2020.

Startups that do raise are struggling to match previous valuations, with down rounds making up 1 in 5 funding rounds in 2023 and 2024—nearly double the rate of the previous four years.

Unicorns that can’t sustain their previous valuations are left with three main options besides closing up shop.

1. Raise a down-round - Secure new funding at a lower valuation.

2. Extend runway without raising - Cut costs, increase efficiency, or find alternative revenue streams.

3. Seek an exit - Pursue an acquisition or alternative liquidity options.

Companies are often hesitant to raise funding at a lower valuation. However, there are examples that offer hope, like ServiceTitan’s IPO (raised at $9.5B in 2021, then $7.6B in 2022) and Ramp’s recent $13B secondary sale (raised at $8.1B in 2021, then $5.8B in early 2024).

While some companies have raised at lower valuations, others have opted to cut costs instead of fundraising. Many have turned to layoffs and spending reductions in an effort to extend runway and grow back into their previous valuations. Justworks, for example, hasn't raised since its 2020 Series E and recently laid off 200 employees. The company previously considered an IPO and was reportedly profitable, but is now prioritizing R&D and growth—leading to headcount reductions to conserve cash.

As exit markets begin to loosen, some companies are finding pathways to liquidity after years without new capital. For instance, Egnyte recently secured a majority investment from private equity firms GI Partners and TA Associates. While not a traditional IPO or M&A exit, this signals investor interest in companies that have grown without relying on venture funding. Despite not raising since 2018, Egnyte has remained profitable and avoided layoffs.

Why this matters: 

Employees with stock options at unicorns with stale funding face growing uncertainty as time passes. With most of these companies still unprofitable, tough decisions loom as cash reserves dwindle. Layoffs, down rounds, and option repricing remain real possibilities. While some startups have already adjusted, many more will have to follow. That said, 2025 brings renewed optimism—well-run companies may still find a path back to their previous valuations.

For those with unexercised options, it’s a good time to weigh your choices carefully and stay informed—equity decisions that once seemed straightforward may require a more thoughtful approach in today’s market.

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Public Multiples Check-in: "Yesterday's Price is not Today's Price"

Markets ended lower in February, as worries about stagflation, softer economic readings, and hotter inflation indicators ripple through the market. There’s also concern regarding Trump’s policies surrounding trade, immigration, and taxes, as well as geopolitical concerns regarding Ukraine. Multiples year-over-year remain declined, with only Consumer showing an increase over the period.

Why this matters: We are likely in for a bit of a bumpy ride as the market continues to digest all of the news coming out of Washington.

February's Top Ten:

1.  Fintech is starting to come back in vogue, and we are seeing some renewed interest in neobanks in particular. Mercury, a fintech specializing in banking services for startups, is in talks to raise more capital in a round led by Sequoia, targeting a $3 billion valuation.

2. Anthropic finalized a massive round, raising $3.5 billion and reaching a $61.5 billion valuation.

3. AI investment just won’t quit. xAI in talks to raise $10 billion at $75 billion valuation. The company was last valued at around $51 billion.

4. DeepSeek’s sudden rise to upper echelon of top AI companies has created a major decision for the Chinese startup to make: whether or not to raise capital. In the past weeks, deep pocketed investors such as Alibaba Group and Chinese state-affiliated funds have expressed interest in financing the company’s next stage of growth

5. Elon Musk seems to just be everywhere now a days, and so are his companies. X, the social media platform, is in talks to raise fresh funding from investors at a $44 billion valuation, the same price he paid to take it private in 2022. It’s an amazing turnaround after many expects estimated its value had substantially decreased.

6. Figure AI had a big month, raising $675M at a $2.6B valuation. In addition to the investment, they have entered into a collaboration agreement with OpenAI to develop next generation AI models for humanoid robots, combining OpenAI's research with Figure's deep understanding of robotics hardware and software. 

7. With all of the AI hype lately, consumer focused startups have taken a bit of a backseat. However, Kim Kardashian’s SKIMS announced a big partnership with Nike this past month. NikeSkims is seeking to "disrupt the global fitness and activewear industry with best-in-class innovation in service of all women athletes."

8. In big news in the crypto, the SEC just approved the first interest-bearing stablecoin registed as a security in the United States. Figure Markets’ YLDS stablecoin, pegged to the U.S. dollar, offers a 3.85% yield and operates under SEC oversight.

9. Softbank in, Microsoft out? At least, that’s how OpenAI is seeing it. Softbank is slated to dethrone Microsoft as OpenAI’s largest investor through leading the most recent funding round the company is seeking with a stake of $15B to $25B.

10. The longer the stalled the stalled IPO market continues, the more we are going to be seeing company tender offers. Cohesity is the latest company to defer IPO in favor of an employee share sale. The company is planning the sale at a valuation of $8 billion.

Why this matters: At what point are valuations for the AI companies too big? For established players such as OpenAI and Anthropic, the product market fit aspect at least makes their numbers somewhat reasonable, but for many of these pre-revenue AI companies that have raised at valuations in the billions, the math just isn’t mathing for me (the math also doesn’t seem to be mathing for Vinod Khosla). There are likely going to be some massive winners in this space, but not every company can be worth billions or trillions of dollars, and especially not just because they have AI in their name.

Startups that are hiring!

• Ambience Healthcare

• Abridge

• Hightouch

• Sigma

• Ramp

• Abnormal Security

• Upwind Security

Open positions are per the company's website.

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