Investors Are Once Again Rapidly Minting Early-Stage Startups As Unicorns

Through the past couple years, investors have talked about how the calming of the venture market was good, allowing more time for due diligence and companies to mature before they sought sky-high valuations.

Well, while investors haven’t totally reverted back to their 2021 attitudes, they are back to rapidly minting more early-stage startups as unicorns, or private companies valued at $1 billion or more.

Just as the overall pace of creating unicorns picked up slightly last year, so did minting them in earlier stages of funding — defined as seed, Series A or Series B — an analysis of Crunchbase data shows. Last year, 39 early-stage companies attained unicorn status — a 70% increase from 2023, when only 23 such young startups got their horns.

Bigger, faster

While it’s easy to say VCs are getting faster with the checkbook, it is important to remember that during the salad days of 2021 and 2022, a whopping 184 early-stage unicorns were minted — so last year’s count is still well below that.

However, last year’s number is a nearly 22% jump from even 2020, when only 32 early-stage startups hit the $1 billion-or-more valuation.

Of course, one reason for the latest surge is artificial intelligence. Many of the early-stage startups that hit the highest valuations last year were in AI-related startups, with most in the generative AI industry.

Elon Musk’s generative AI startup xAI, raised a $6 billion Series B in May that included investment from the likes of Valor Equity Partners, Vy Capital, Andreessen Horowitz and Sequoia Capital, and valued the company at $24 billion.
In September, artificial intelligence research lab Safe Superintelligence raised $1 billion from the likes of Andreessen Horowitz and Sequoia Capital valuing the Palo Alto, California-based company at $5 billion, per Reuters. SSI, co-founded by OpenAI’s former chief scientist Ilya Sutskever, is looking to develop safe AI systems
In October, Poolside, which builds artificial intelligence software for programmers, closed a $500 million Series B led by Bain Capital Ventures valuing the startup at $3 billion, Bloomberg reported.

Other AI startups such as Cognition and Moonshot AI also raised massive rounds at unicorn valuations. In fact, nearly 45% of all the early-stage startups minted unicorns last year were in AI or AI-related fields.

There’s more

It wasn’t just AI, however, as other sectors saw young startups raise at huge valuations. That includes a couple of China-based electric vehicle developers — electric hydrogen truck company Zhizi Automobile locking up a $53 million Series A at a $3.3 billion value, and Chunqing Technology, a China-based company creating EVs powered by alcohol and hydrogen, raising a $135 million seed at a $1.5 billion valuation.

Young robotic companies also fared well, as Physical Intelligence, a startup developing brains for a wide array of robots, raised a $400 million round at a $2 billion valuation in November, and Sunnyvale, California-based Figure, which is developing AI-enhanced robots that it hopes will be able to perform dangerous jobs and alleviate labor shortages, raised a huge $675 million round at a pre-money valuation of roughly $2 billion.

In fact, an array of other sectors from Web3 to defense to fintech all saw young unicorns.

Old ways?

The uptick in early-stage startups being minted as unicorns does not mean VCs are going back to their 2021 ways. However, they certainly seem willing to once again invest at high valuations, even if the company is still relatively young.

It’s also important to note that venture funding overall saw an uptick last year, so it would be logical to expect at least some of that money to help push young startups to higher valuations.

The hype around AI certainly makes it seem plausible investors are once again fearful of missing out on the next big thing and are willing to bid up at nascent stages of companies.

That has happened before.