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For a generation of startups built in the wake of ChatGPT’s ascension, the lofty valuations
they initially enjoyed quickly withered away to a far more modest standing, as nearly half of
857 so-called ‘unicorn’ startups haven’t raised fresh funding in three years, according to
PitchBook, the database covering global private and public capital markets.
Five years ago, venture capitalists were pouring money into startups selling everything from
scheduling software and customizable dog meals to lingerie and online ticketing platforms,
anointing them with billion-dollar valuations before any had shown sustained profit. In
what may perhaps be the most sudden example of AI’s transformative nature, more than
220 of these direct-to-consumer companies that once hit billion-dollar valuations are now
considered ‘fallen unicorns’.
In the wake of the pandemic, a combination of cheap money and pent-up demand sent
start-ups booming. The threshold for being deemed a “unicorn” company, according to
PitchBook data, is $1 billion valuation or more, with 857 American startups holding that
distinction. Nearly half of that group, reportedly, has not raised fresh funding in the last
three years, as of the end of 2025. Startups that last raised in 2021 were worth 68% less on
average at the end of last year, while those that last raised in 2022 saw a 52% decline,
according to PitchBook’s own valuation estimates.
The fallen brands are well known to consumers: Glossier, Rothy’s, Brooklinen, Savage X
Fenty, The Farmer’s Dog, powder supplement maker AG1, robo-advisor pioneer
Betterment, and online ticket marketplace SeatGeek.
These companies came of age in an environment that rewarded nosebleed valuations
based on two broad assumptions: interest rates would remain low and a startup could
always be acquired for its engineering talent.
With the arrival of ChatGPT in November of 2022, things quickly changed.
“Now you’re seeing 50 engineers do what it would’ve taken 500 engineers to do five years
ago,” said Samir Kaul, a partner at venture firm Khosla Ventures. “We had to completely
reshuffle how we valued these companies.”
As the AI boom has funneled billions into OpenAI and Anthropic ahead of their expected
massive IPO’s later this year, hundreds of startups have been left in the dust, essentially
cut off from venture funding because of their inflated valuations and outdated technology,
and yet not profitable enough for the public market.
“A lot of those companies are pre-AI, not just in their cost structure, but also in their
products,” said Mercury CEO Immad Akhund, a company that provides banking services to
a third of early-stage U.S. venture-backed firms.
“They’re definitely in a difficult spot,” he said. “All the attentions on AI, so if you’re not an AI-
first company, you need really strong numbers to raise.”
The hardest hit companies are enterprise software firms, like scheduling startup Calendy,
which represent the single largest category among the fallen unicorns. There are 75
service-as-software (SaaS) firms appearing on PitchBook’s list, double the number of
fintech companies, the next hardest hit.
Many companies started before generative AI are weighed down by bloated staffing models
and software designed for the pre-AI world, making any transformational pivot a challenge.
Prior to the reset, a startup could be sold to a larger company looking to acquire the
smaller firm’s engineers, for roughly $2 million per coder.
But that floor evaporated after AI coding tools allowed far smaller teams to build products,
leaving fewer exit opportunities.
With that, it is worth noting that while “fallen unicorn” may make great headlines, it doesn’t
necessarily make or break good business. PitchBook’s numbers are essentially estimates
based on employee growth and public comparables, not actual rounds. Plenty of the
aforementioned startups are still operating, still growing and still profitable.
Also, according to some observers, the AI-native cohort is being priced on revenue
multiples that look like the 2021 SaaS bubble that just popped. Two companies (Open AI
and Anthropic) absorbing $250 billion in venture capital isn’t a balanced ecosystem, but a
vulnerability: it’s a setup for a brutal correction if model commoditization or computing
economics break the wrong way.
Many of the companies mentioned have dismissed PitchBook’s findings, claiming the third-
party speculation is false. Skydio, a drone maker, announced it had raised $110 million
through investors, raising its valuation to $4.4 billion.
Supplement maker AG1 was reportedly looking to sell all or part its company at a $2 billion
valuation. A spokesperson for The Farmer’s Dog claimed PitchBook’s estimates were
incorrect and that the company’s valuation has “only increased since our last funding
round in 2022.”
Still, valuations don’t crash because companies suddenly get worse—they crash because
the benchmark of what’s possible gets dramatically better. For those whose business
models are based on assumptions about software costs, head count or workflow that
predate ChatGPT, you’re not facing competition, but rather the need for a full
recategorization of the new cost curve.
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