Despite AI boost, unicorn creation hits 6-year low

Fewer unicorns were minted in 2023 than any year since 2017 as valuations toppled and VCs took longer to pull the trigger on new startups.

Just 45 startups reached a $1 billion valuation, down 87% from 2021's high-water mark of 344 new unicorns, according to the Q4 2023 PitchBook-NVCA Venture Monitor.

Among that cohort, generative AI dominated: 44% were AI and machine learning companies. That includes defense-tech startup Shield AI, large language model specialist Adept and deep-learning AI infrastructure developer Lambda.

Generative AI companies boasted huge valuation step-ups over the course of the year, to the envy of founders in industries hit harder by LPs' pullback from venture investing.

Lambda, for example, went from a $170 million post-money valuation at its Series B to a $1.55 billion valuation from its Series C in just 11 months between late 2022 and late 2023, according to PitchBook data. An up-round of that magnitude—an 812% valuation jump—reflects a pressing industry demand for GPU cloud services and deep learning models, a trend likely to continue this year.

By contrast, the valuation boom that more than 500 startups rode to unicorn status in 2021 and 2022 came to a halt in other industries. Founders in less-buzzy fields have been increasingly confronting the unwelcome prospect of down rounds and, for some, even more unfavorable scenarios like multiple liquidation preferences or distressed sales."

In the post-COVID days, sometimes we found companies where we said, 'we think this is the right company,' but the valuations were just off the charts, and there was no way we could make any kind of profit on those multiples," said Thomvest Ventures managing director Don Butler.

ThomVest's sole LP, billionaire Peter Thomson, just announced a $250 million fund for the VC to invest in companies—including, Butler said, in companies whose valuations have now adjusted to a more reasonable price for the market.