Wednesday, July 6, 2022

Startup Markets, Summer 2022 Edition

About a month ago, I wrote a tweet storm on the changing startup financing and employment environment. This blog captures aspects of that tweet storm and some of its predictions and extends them further. Like all predictions this is what I view as a highly likely scenario versus the only potential future path for the next 3-18 months or so.

The high level view is that things have yet to get truly bad in private tech.  2021-2022 were an anomaly due to COVID policies which both created an incredibly cheap low interest money environment, pumped the stock market, and facilitated adoption of certain types of tech. This environment led to both excess in fundraising but also in hiring. This means that as money transitions back to to "normal" levels teams that were hired too far ahead need to shrink. Many areas (hiring plans, valuations, time venture capital raised lasts, etc) are roughly reseting to 2018/2019 norms, which themselves were all time highs prior to the COVID era.

If interest rates and money supply continue to tighten and a recession happens, then things should get worse. The below largely deals with the base case of things roughly stay where they are now. More likely, things will get worse before they get better. Nonetheless, it is still a great time to start a company.

So what do the next few quarters look like?

1. Financings

Valuations will continue to drop and are not stable yet

Private markets tend to lag adjustments in public markets by 3-9 months and tend to adjust from the later stage, pre-IPO companies first to the pre-seeds last. Private technology startup valuations are still unstable and for some stages will continue to drop. 

Series D and later have come down and closer to public comps with pre-IPO companies roughly at public comparables. When you fundraise matters a lot - rounds started 3-4 months ago are pricing much higher than rounds kicked off now. 

We are in a “sliding knife” market and things have only partially propagated into earlier and earlier companies. For example, series B/Cs have dropped 30-70% but the repricing is inconsistent. Some companies have been getting high valuations over the last few months while others can not fundraise at all. Series A valuations have dropped maybe 20-30% but likely should drop 50%+ from highs. 

Series seed rounds have come down some but will likely drop further as more series A reprice harder as investors seek each round to be 2-3X the valuation of the prior round (the traditional standard). Private tech is for some stages where public tech was towards the beginning of this year. 

Hitting a new startup market valuation stable point is likely to take another quarter or two barring a recession or additional public market drops. These things take some time to fully propagate to all stages, founders, and investors.

Top up rounds 

Many companies are doing quick top-up rounds to add 6-18 months of runway and ensure the company has 36 months of cash to outlast any economic downturns or recessions. These rounds may be anywhere from $1M to $30M in size. Valuations on top ups have increasingly gone from slightly up to flat with the prior round.

If you have supportive investors, doing a top up round may be wise simply to have more padding. You want to make sure you are either default alive or default fundable. The only downside of doing one now is investors are starting to get top-up fatigue as so many companies are doing these small bump rounds.

Metrics and speed

Investors are refocusing on metrics and actual diligence again before investing in companies. This means the time for each fundraise is stretching back to historical norms. While fundraises in 2017 took 2-4 months for most companies, during 2021 a round could happen in a few days to a few weeks.

Investors are looking for metrics around burn multiple & capital efficiency, net revenue retention, growth rate, and overall cash needs of the company.

As money leaves the market (see below), fundraises are likely to slow from 2021's a company raising a new round every 6-9 months back to the historical norms of a company raising a round every 12-24 months. Companies with a valuation that far exceeds their product/market fit may not raise for 24-36 months, and many of them have the cash to last that long.

Expect structured rounds or down rounds in the coming quarters

Down rounds and structured rounds (where investors are "guaranteed" certain payouts if the company survives) will likely accelerate in 6-18 months. They will largely impact companies that raised during the all time highs of Q3 or Q4 2021 and now find themselves "stuck" and unable to raise more money. These will accelerate as a number of companies get low on cash and need to raise again, but have failed to grow into their 2021 valuation.

Companies like Facebook, Square, and others have had to do down rounds or structured rounds at one point or another. So, it is not the end of the world if it happens.

Many unicorns will need to reprice if they can not get to high enough ARR with strong unit economics/burn multiple. Others will reprice for employee options.

Many unicorns have yet to realize they are stuck for now with too high a valuation and that they may never hit current levels again. Lots of “zombie” companies do not quite realize they are stuck yet and may never see their valuation highs again. Lots of companies will take 2-3 years until next round to catch up on Q4 2021 valuation.

Money leaving the market

Many investors who can invest in either public or private companies are mainly just focusing on public companies. This not only includes hedge funds, but also family offices and in some cases traditional venture funds. They view public markets as superior in terms of multiples and returns. Why invest in a $5B valuation private tech company with $50M in ARR when you can invest at a $5B valuation for a public company adding $50M in ARR every two months? Public companies are also liquid at most moments so you can exit the position more easily, and you can also hedge the position.

In parallel, venture capital LPs (the people who invest in VC funds) are asking traditional VCs to slow their investment pace. In 2021, VCs invested their venture funds in a single year. So a $1B fund was largely invested the year it was raised. Now LPs are asking VCs to go back to 2018 standards and invest over a 2-3 year period. So a $1B fund would get invested at a pace of $300M-$500M a year. Thus you decrease the actual VC dollars in the market by 2-3X, even if the fund size announcements sound the same.

Net-net is a number of sources of venture funding are out of market right now for the latest stage companies, pushing their valuations down. This will back propagate into earlier stages and will last as long as it takes to reset valuations across the board.

2. Employment & hiring

Layoffs are just beginning. Many companies are planning them now but have not pulled the trigger. For a bigger company it may take 1-2 months to decide to do a layoff, 1 month to plan it, and then a few days or weeks to do it. Smaller companies can move much faster, but represent a smaller proportion of the overall tech employee base. 

We will see more layoffs in the next 1-3 months and then again in 6-9 months. Many will not cut enough and will need to do a second layoff 6 months later. Others have not seen business drop or are not conserving cash. “We will grow our way out of it”. These sorts of companies may do layoffs 3-6 months from now when they realize their burn multiple is too high or their own revenue decelerates as their own customers cut costs. Some startups who sell to other startups may be most vulnerable in this regards in the short term.

Create a plan, don't just blindly cut

A minority of companies may cut when they shouldn't, as their business is doing great. Context matters. Create a revenue and burn plan versus just blindly cutting. Maybe you should take this opportunity to hire great talent that will have fewer places to go? Maybe you should invest in growth within burn multiples?

If you do have to do layoffs, it is usually better to err on the side of cutting deeper than is needed and then rehire later versus doing multiple layoffs spread out in time. While most cultures can sustain a single layoff, it is harder to do multiple in a row and this can negatively impact all the people still employed with the company, as well as employees who get laid off who thought they were safe. 

In general, it is easiest to a layoff when all your peer companies are doing layoffs. Your employees will view it as an industry-wide event versus something specific being an issue at your company. Obviously, you should only do a reduction-in-force if you truly need one. But all else being equal, timing wise it is both better to do it early (to conserve more cash) and when others are doing it (to minimize cultural impact and concerns about company health).

Some companies have also started getting more aggressive in performance cycles and letting go of 10% or so of their employees who are underperforming relative to their peers. In this case it is not a layoff but simply tightening performance criteria. GE famously would do this performance based approach annually, and McKinsey similarly had an "up or out" policy on an annual or every 2-4 year basis.

Cleaning up culture

Expect more “cleaning up mission and culture at work” moments. More CEOs will reemphasize that the company focus should be on customers, business building, and its core mission. In a turbo charged hiring market, the relationship power on average lies with employees over management. As markets normalize, lay offs happen, and jobs outside of MAMAA companies get sparser. Management regains some power and more importantly backbone. Maybe the vehement Slack debate on international political regimes that properly support organic oat milk[1] are at least partially superfluous for your pet insurance startup whose business is tanking?

MAMAA companies will continue to be the core of tech employment & compensation

Meta, Apple, Microsoft, Amazon, Alphabet (MAMAA companies) are a giant talent, compensation, and entitlement sink for the industry. They employee a significant portion of the overall tech employee base. For example, Facebook "only" plans to hire 7,000-8,000 new engineers in 2022 (currently at ~80,000 people). Google, Microsoft, and Facebook have around 400,000 employees between them. Apple is 370,000 people (but includes retail and other areas) and Amazon is over 1,000,000 (due to warehouses and other areas). Big tech employers are now a major part of the overall tech employee base and serve as a sink, buffer, or reserve for the industry in terms of layoffs, culture, or other areas.

Mergers and Acquisitions (M&A)

More M&A will happen. Founders are finally talking about selling when before there was little incentive to do so due to ever rising valuations and secondary stock sales.  In a tougher fundraising environment, M&A will become more of a buyers market. There should be lots of exits or attempts to exit in 6-18 months. Companies will realize their business is not that strong, or that exiting and having liquidity is better than trudging on indefinitely. As private market valuations align more with public market ones, it will also be easier for larger companies to justify buying smaller ones.


Recession (if it happens) likely to hit startups selling to other startups first, then startups selling to mid-market customers, then those selling to large enterprise. In parallel, companies that had a big positive COVID bump in revenue may now see a slow down as people return to offline activities and spending.

Recessions drop revenue and earnings growth which slows everything down for affected companies. If earnings and revenues drop so will growth rates and valuation multiples. For startups, a recession may slow their sales cycle and adoption as their customers cut costs.

If a recession happens there will be room for growth, multiples, and valuations to drop and for capital availability to tighten further. This may lead to further layoffs or other turbulence.

Even without a recession we may see a number of public technology companies miss their earnings in coming quarters as things slow, leading to a broader decline in the segment's multiples and market caps.

Building in this era

The reality is that relative to historical norms, we are not into truly tough times yet for the tech ecosystem. What we have seen is monetary policy tightening to combat inflation (which was caused by quantitative easing, money printing and drops to consumers by government as part of COVID policy, and some shorter term supply chain issues). The new quantitative tightening and removal of liquidity from the economy has caused the cost of capital to go up, and growth stocks to drop back to 2018-2019 levels - which themselves were all times high (This is of course an aggregate view. Some companies are undoubtedly being inappropriately penalized right now market cap wise, while others may still be far ahead norms). 

In other words, nothing truly terrible has happened in aggregate yet relative to 2018-2019. However, during the last two years the startup (and public markets) ecosystem ran ahead of itself on valuation, fundraising, and hiring. This overbuild means many companies need to slim back down to match their real revenue base, and many companies raised at a valuation that is high relative to their progress. A number of companies will inevitably grow into these valuations and be fine. Others will need to do down rounds, structured rounds, or exit to others.

It is possible with ongoing tightening of monetary policy (interest rate hikes and QT) that times will get worse. In that case you can expect further acceleration of layoffs and more valuation drops. Even if that were to happen, this is still one of the best eras in history in which to build a company. Capital and information are still broadly available, opportunities abound, and we are undergoing a generational shift to technology underlying all industries in a variety of ways.

A number of great companies will be built in this period. Apple, Microsoft started in 70s stagflation. Cisco started after “black Monday”. Multiple great companies emerged & grew post financial crisis (Uber, Airbnb, Stripe, Square etc). Nothing fundamental has shifted in terms of the long term view of technology as a transformative force remaking the world.

It is still a great time to build.


[1] Oat milk is quite odd in that unlike most other non plant-based milks which date as far back as the 13th century, oat milk was invented in the 1990s. Oat milk can also have a high canola oil content as the canola acts as an emulsifier to put the oats in suspension with the water. Oat milk was invented in Sweden, which makes intuitive sense on many levels.



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Raising Money

Tuesday, April 5, 2022

Crypto Twitter

With Elon Musk joining the board of Twitter, now is a good time to consider all the things Twitter should be doing, that it has never done. There are lots of obvious features (edit tweets, longer form content, better user controls, better onboarding, better spam filtering, business account support and integrated CRM and CS, etc) that were being debated within Twitter even when I was a VP at Twitter 10 years ago! 

So instead of focusing on all those things, I thought it would be interesting to think about moving Twitter from the web 2 into a web 2/3 hybrid. This could open up significant user benefit, as well as monetization potential for Twitter. If a Twitter buy-out were to ever occur, these might be interesting mechanisms to increase the value of the company substantially.

Potential parts of crypto Twitter [1]:


  • This is an obvious one - people on Twitter should be able to mint and distribute NFTs via Twitter. Imagine OpenSea as a deep Twitter integration. As you purchase an NFT on the platform you could be prompted to swap this in for your profile image.
  • Distribution of NFTs could occur via the platform with for example content creators providing priority access to their followers.
  • Twitter could do "Bitclout the right way". For example, each person could have tokens issues for them that could be purchased, distributed, and used for a variety of in app use cases including purchasing of NFTs (see above) or participating in some future on platform revenue generated by that individual.
  • Token or NFT ownership could be used to allow entry into specific entry or interest groups, a la Farcaster. This could be external token buys (e.g. buy UNI to get into a Uniswap specific group) or internal (buy Billie Eilish tokens or NFT to get into her special community or fan group).
Crypto Identity and Wallet.
  • Each user could have a wallet and related identity auto-generated as part of a Twitter account. This identity could be used in interesting cross platform ways ("cryptoauth with Twitter") around the web. The wallet could be used to hold crypto assets (including tokens from the platform and NFTs) as well as be used for payments using Twitter as a service.
  • Pseudonym bridges. See e.g this tweet. That might be an approach to blend identity/credibility with the ability to tweet and speak more freely.
  • Why not set up a DAO to control a Twitter board seat? The DAO could be part of fundraising to do a Twitter buy out, or just to add an interesting twist to governance. The DAO could be constrained in terms of who can be nominated for the board seat (e.g. would need specific experiences or credentials so a shiba inu isn't elected to the board). This experiment in governance could also have the option for Twitter (or another party) to buy out and retire the DAO, or the DAO can be redeemed, if this board mechanism creates too many issues in the long run.
Lots of Other Stuff
  • There are lots of deeper integrations of web3 and crypto that could occur including some gaming uses cases, eventually rebuilding the product on web3 rails etc. However, the above are some of the obvious/easiest ones to implement...

[1] Dan Romero of Farcaster, of course, thought about this a while ago!

Thanks to Matt Huang for quick comments on this post.


Old Crypto & Web3 Stuff:


Startup life

Monday, October 11, 2021

MegaCycles in Tech & Crypto

Every 8-10 years, the technology industry used to go through a boom and bust cycle. A new technology or platform would emerge, there would be rampant investment and speculation, a few strong hypergrowth survivors would emerge and most of the rest of the new startups would collapse or get consolidated. This happened with semiconductors in the 60s & 70s, microcomputers in the 80s, and the internet in the 90s. 

Each successive wave was bigger than the prior - both in terms of market cap created as well as money that flooded in. 

In the 2000s until now, something odd happened. The venture boom and bust cycle stopped. Things in tech have been replaced by a single long ~20 year boom. Even the financial crisis of 2007-2009 did not impact tech startup formation or growth much.

While there are undoubtedly multiple drivers for this lack of tech cyclicality [1] one potential explanation is the stacking of technology waves on top of each other. Instead of a single cycle drawn out over 8-10 years for a single new technology, we are now seeing multiple overlapping tech waves all happening on top of one another. This is both increasing the size of the overall resultant result, as well as smoothing out any down cycles.

For example, from 2005 until now we have had overlapping waves of cloud, social, mobile, SaaS, vertical SaaS, fintech, AI, and crypto. All of these would have had their own 10-year cycle in the past. One could argue we are now going through a mega-cycle ("poly-cycle"?) which may last for (at least? at most?) a few more years. Part of this cycle is dependent on capital availability and quantitative easing, but a lot of it is just software eating multiple industries simultaneously. COVID was a big driver of tech adoption as well across both consumers (Instacart, DoorDash, Amazon, etc) and enterprises (Zoom, Stripe, Figma).

One of the main characteristics of a megacycle is the lack of downturns. Instead of a sharp recession in tech leading to lots of layoffs, companies dying etc, the good times just keep rolling as wave after wave of new technology shifts overlap. This has both good and bad side effects to be discussed in a future post.

The time between these cycles has been collapsing, and the size of each cycle increasing. As each wave accelerates, it also may accelerate subsequent waves. For example the 10Xing of people online, time spent online, spend online, have all accelerated each other and their underlying technology waves. Sometimes adoption of something increases more adoption due to network or scale effects, versus slows things down (although large numbers inevitably catch up).

Interestingly, crypto itself has previously had much steeper cycles on roughly 4 year cycles (timed with Bitcoin halving and therefore a sudden shift in supply/demand in crypto leading to bitcoin and then alt-coin runs). The first crypto cycle was effectively the bitcoin white paper drop + initial mining. The second cycle was the emergence of Ethereum, ICOs, and new protocols & tokens. Many crypto people I know assumed that in 2021 we should have had a down cycle in crypto.

One potential explanation for a lack of downside is the massive money printing and spending being done by the US government, which is now literally just sending people cash. This creates both monetary stimulus that will inflate multiple assets, as well as potentially have investors seek crypto as an inflationary/low of dollar value hedge.

An alternative, or overlapping explanation one could argue is around overlapping crypto cycles - or a crypto mega-cycle. Just as tech had multiple overlapping waves, crypto is now seeing the same thing with multiple overlapping waves of DeFi (Uniswap, Aave, Maker, etc.), NFTs, DAOs, and the launch of multiple interesting layer 1 protocols all started a few years ago (Solana, Near, Celo, Minna, etc.). There are also an increasing number of efforts being built between crypto and traditional fiat rails, as well as broader adoption trends. Given the diversity of crypto efforts, a sudden drop and decimation in one part of the market (for example if NFTs hit a bump for some reason) may be smoothed out by a new trend or rise in another (DeFi or BTC running). In other words, parts of the market may short-term decrease their correlation a little over time as the footprint of crypto and its uses cases expands.

Some argue Crypto may also have gotten large enough in terms of usage and market cap that the extremely large fluctuations from the past may dampen a bit. Loosing 50% of a $2.4 trillion market cap is a $1.2 trillion shift - but you still have over $1 trillion of market cap left and potentially lots of buyers in the wings due to sheer scale and multiple use cases. 

Sustainability of market cap may reenforce the reflexive nature of crypto. Even when crypto dropped 50% in 2021 it still had a $1 trillion+ market cap and it was clear it was not going away for good. This drives more participants ongoing into the market so there will be more buyers and users and the potential for a stronger snap back. Similarly, great talent may continue to enter the market in the absence of a sharp dip. In 2000-2001, there we mass layoffs in technology and many people who left tech did not come back. In 2017 talent into crypto slowed as the downcycle hit. Currently the better sustainability of crypto market cap means more tech and new grad talent continues to come into crypto which should help push the next innovation waves in the market.

It will be interesting to watch the coming year as to whether crypto goes back into cyclical behavior with a sharper downturn soon, or if we are now caught in a megacycle. 

The big confounder on this all is ongoing mass scale government money printing and spending. Given ongoing supply chain and energy issues and pricing rising in various industries, more people seem worried about the chances for transitory or prolonged inflation or "stagflation"[2]. Bitcoin was started in part as a reaction to the great financial crisis and US monetary policy. One could argue the early origins of cryptocurrencies was to hedge the exact environment we now find ourselves in[3].

Thanks to Matt HuangFred Ehrsam, and Curtis Spencer for comments on this post.


[1] For example, one aspect or cause of the boom may be explained by a few things including the ongoing need for capital to find a high return / high growth home due to low to no interest rates caused by quantitative easing. So a lot more money has flown into tech over time due to a lack of yield anywhere else.

[2] Stagflation is when there is rising inflation - so companies need to pass on higher pricing to cushion margins. However those higher prices result in demand destruction and a stagnant economy.

[3] So "hedge US macro" may be sufficient cause for a flight to crypto right now and the quick rebound from a down cycle.


Old Crypto Stuff:


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Sunday, September 26, 2021

The False Narrative Around Theranos

One of the interesting aspects of the Theranos trial is the degree to which some folks are buying into part of the defense's narrative that "Theranos was just acting like every Silicon Valley startup". This is of course blatantly false, but it is being adopted as some form of truth. 

The claim is that every tech founder somehow pushes the envelope of truth, and therefore that is all Theranos did (versus potentially committing fraud over a 15 year period, lying to regulators, physicians, employees and investors while endangering patients).

This analogy breaks down on multiple levels. 

There is a big difference between drunk driving at 90 mph in a school zone versus driving 5 miles too fast on the freeway. (Or, in the case of most tech companies, simply respecting the speed limit).

While there are obviously some bad actors in tech, there does not appear to be quantitative evidence to suggest this is any worse than in non-profits, finance, mediahollywood, or any other sectors

Where the analogy breaks down between Theranos and the "average" tech company:

1. Most technology companies do not lie about their product or service. If they did so, they would not be able to attract or retain great employees, or scale revenue and product adoption so rapidly. If their product did not work, no one would use it. This is especially true over a decade+ journey. Despite some high profile counter-examples, most tech companies are honest companies run by people who want to do good.

2. Over its 15 year history (and $700 million raised), Theranos never had a working product. It appears possible Theranos' approach was potentially unlikely to actually be able to work based on chemistry/biological contamination of approach. Think about this for a minute. Theranos apparently lied to people about its product's potential for 15 years without ever making it work. 

Additionally, given the small titers of blood, the finger prick as a source of contaminant versus venus blood draws, and other aspects of the chemistry, some believe the Theranos approach is extremely hard to make work from a chemistry perspective.

3. The company launched a fake product to living, breathing patients whose potential course of treatment and therefore life and death situations depended on accurate results. This is different from a telling a CIO that your data science tool for their customer support team would be ready in Q1 and missing the deadline. Real harm happened to real people, who course of care depended on Theranos results.

4. The scale of lying was exceptional. Theranos appears to have misled regulators, employees, investors, partners, physicians and patients. It immersed itself in secrecy, even internally, to be able to keep employees from talking to each other and for the ongoing deceit to be detected. This is different from most tech startups where transparency is often one of its early core principles or approaches. From weekly all-hands to internal Looms, tech startups tend to be highly transparent places to work.

5. Theranos raised no real mainstream venture capital. None of the mainstream tech or biotech funders invested in Theranos. Given that there are tens of reasonably good venture firms, this is striking.

6. Theranos was a diagnostics company, not a "tech" company. It is striking how many non-tech companies that blow up did not really ever have much to do with technology. Theranos fit squarely in the "medical devices & diagnostics" world and its focus and (never-quite-worked) innovation was on the chemistry and hardware for biology side. WeWork - another company often pointed to as a "tech company", which had issues for other reasons (but started off as a viable business) was a real estate company. Branding one's own company as "tech" tends to be give it higher multiples, access to more money, and a brand allure with media. Eventually reality tends to catch up.

An increasing portion of the discourse in the USA today seems to be anti-tech, anti-maker, and anti-success. This stance probably reflects more of what is currently happening in the people writing these negative pieces (or opining in articles) rather than in the tech industry itself. Theranos is being used as a catchall example to drive this false narrative that people can not do good work, benefit millions of people, and make money, without somehow being nefarious. I encourage you to not buy into this false hype. :)

Monday, June 21, 2021

Unicorn Market Cap, June 2021 (Almost Post-Pandemic Edition)

I have previously written about Unicorn Market Cap and Industry towns in 2019 and 2020. Over the last 8 months the number of tech startups worth $1B or more ("unicorns") has grown by 43% from 487 Unicorns to 701. This is almost double the 361 unicorns in June 2019 (!). 

Data was taken from CB Insights and a special thank you to Shin Kim, CEO of Eraser for the data and graphs. 

Caveat emptor: data from CBI is updated/reconciled over time, so very recent unicorns may not be included yet. However this provides a directional view.... Raw data here.


The regional nature of private tech market cap continues to dominate. The big shifts over the last year include:

(1) United states: Over 67% of the new unicorns by # are in the USA with 154 total. (out of 227 globally)
There were 69 new unicorns in Silicon Valley, 30 in New York, and 8 in Los Angeles. 

This is increasing share for both the USA & Silicon Valley as a % of global tech unicorns, with NY and LA accelerating somewhat. New York anecdotally feels like it has transitioned into a break out cluster of its own.

The pandemic has increased unicorns in the USA at a fast clip.

(2) China has slowed on new unicorn generation.

While China is 29% of all unicorn market cap, it only added 9 new unicorns (roughly 4% of global total) since October 2020.

The decline in new unicorn formation in China is striking. One potential interpretation is it at least in part a data issue. For example, 20 or so Chinese unicorns from pre-2020 were just added to this data set as a historical reconciliation. Other interpretation in the last section below.

(3) Europe added 25 unicorns.
London (8 new unicorns for a total of 21), Paris (5 new unicorns for a total of 13), Berlin (5 new unicorns for a total of 9), and Stockholm (2 new unicorns for a total of 4, including a decacorn) added the most new unicorns. 

(4) India added 11 unicorns.
Major cities to add unicorns included Bangalore (7 new unicorns for a total of 14), New Delhi (2 new for a total of 12), Mumbai (1 new unicorn for a total of 4), and Chennai (1).  


The overall Unicorn rankings have remained the same. The USA is the clear front-runner, China next, followed by the EU and then India. Israel continues to have a large number of unicorns per capita and Canada has started adding them at a faster clip then before (4 new unicorns in Toronto alone in the last 10 months). Brazil is the biggest generator of unicorns in Latin America.

Unicorn market cap is highly concentrated by specific cities:

DECACORNS: $10B or larger market caps
Decacorns are largely concentrated in a handful of countries - although a number of decacorns have gone public in e.g. Indonesia and others.

Within each country, specific cities or regions continue to make up 50% or more of the country unicorn market cap.

For example, Silicon Valley is 51% of the US market cap and 47% of unicorns by number. New York is 11% of market cap and 17% of unicorn by number, and Los Angeles is 11% of market cap (largely due to SpaceX) and 7% of US unicorns by #.

Clusters & industry towns clearly continue to matter.

Europe has a number of centers with London the largest by a margin, followed by Stockholm, Paris, and Berlin.

Beijing (59% of market cap due to ByteDance and 37% of # of Chinese unicorns) and Shanghai (13% of market cap and 24% of unicorns) are the largest in China.

While 77 cities around the world have at least 1 unicorn, most are concentrated in 13 cities with 11 or more unicorns.

"New tech clusters" are not big clusters yet
A lot of great marketing has occurred for Austin and Miami during the pandemic. Austin added 3 unicorns to get to 5 total (below new additions of unicorns in SV, NY, LA, Chicago and Boston and tied with Seattle, DC, Philadelphia). Miami added 1 unicorn to get to a total of 3 (although I am aware of at least one other that just moved there from LA that does not appear counted in the data yet). I am anecdotally bullish on the long term prospects of Miami given the people I know who moved there and the frontier feeling it has. Under discussed as future clusters with strong prospects are Denver (2 new unicorns for a total of 4) & Boulder (1 new unicorn) and Salt Lake City (2 new unicorns for a total of 4). 

As noted above, Silicon Valley continues to make up 51% of market cap and 47% of total unicorns in the USA. NY has grown its share of unicorns by number relative to other US cities.

Here is the full list for the USA

Beijing, Shanghai, and to a lessor extent Shenzen continue to drive unicorn # and market cap in China.

In India Bangalore and New Delhi continue to run neck in neck, with Bangalore having 2 more unicorns.

EUROPE (and Israel)
Europe continues to see strong clusters in the UK (where London easily dominates), Germany (ditto for Berlin) and France (ditto for Paris).



In Israel, Tel Aviv continues to be the main cluster.

In parallel to new unicorn formation, unicorns also "graduate" via an IPO/DL/SPAC, an acquisition, or going out of business
As unicorns graduate the founders and employees of the companies may either fund other new ventures as angels or VCs, or start new companies themselves. It will be exciting to watch more tech ecosystems grow as more unicorns go public.

This data should be caveated as new unicorns from past years are sometimes added by CB Insights (who have done a great public service by aggregating this data to begin with!).

So caveat emptor on over interpreting this data. However, the difference between the USA and China on new tech unicorns over the last 2 years in notable.

Possible interpretation would include:
1. Data fidelity. Is China reporting delayed?

2. Keeping it quiet. Given the unusually high death rate (a Chinese billionaire dies every 40 days) and kidnappings of Chinese billionaires, perhaps there is now a disincentive to announce highly valued financing rounds? 眼不见,心为静。 眼不见心不烦。

3. China is producing fewer tech unicorns. This seems odd given the acceleration seen in tech due to the pandemic, but is possible. 

Some of the top countries for rest of world look like this:

Raw data:



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