Unicorns face 5-1 odds as they wait for public markets to warm • TechCrunch
Earlier today, it was exchange dig in Changing investor sentiment regarding growth and profitability. a new report Looking at the cloud and software companies from Battery Ventures, I make the calculations on how investors are rewarded for faster growth from less profitable companies – and dare we say, profitable Comp? The data indicates that growth, at least for the time being, is no longer sufficient to maximize the value of the company.
For startups preoccupied with amassing new revenue with minimal burnout, the situation is good news. For companies that raised while money was cheap — and sitting on huge valuations based on last year’s valuations — the news that profitability is once again in vogue is not welcome. It is now likely that many unicorns are caught between changing investor preferences and general pressure for the value of software companies.
why? Because more unicorns were minted during the 2020-2021 era on the back of rapid revenue growth than anything else. With revenue multiples skyrocketing over that time period, a slew of startups have hit the $1 billion valuation threshold — or multiples thereof — on the back of a small, albeit rapidly expanding, top-line.
If revenue multiples drop, that’s bad news for unicorns. If revenue multiples decrease And the Growth loses luster compared to profits, high-burning unicorns that were once more valuable to something else They are doubly related to changing market conditions.
Even worse, Patrie points out some hard facts about the number of unicorns that may be able to go public in the coming years compared to the number of unicorns in the market today. There is a bunch of good news in the data for truly outstanding startups. But for the swamp rhino, there’s more than just storm clouds on the horizon.
Why is math bad?
In the past 10 years, Battery has reached 200 software companies that have gone public. In contrast, the adventurous company counts over 1,000 new rhinos minted during the same time frame. That’s a 5-1 ratio of multi-billion dollar IPOs of new companies.