More than 220 US unicorn startups have lost their billion-dollar valuations since 2021

More than 220 American startups that once achieved billion-dollar valuations have now been reclassified as "fallen unicorns", according to PitchBook data provided exclusively to CNBC — a stark illustration of how dramatically the investment landscape has shifted since its pandemic-era peak.

Valuations have collapsed since the 2021 highs

Startups that last raised funding in 2021 are now worth an average of 68 per cent less than at the time of that raise, whilst those that last raised in 2022 have seen valuations decline by 52 per cent. Nearly half of all 857 US unicorns have gone three years or more without securing fresh capital.

According to Ryan Falvey of Restive Ventures, valuations have fallen by approximately six times since the 2021 highs, meaning a company generating similar revenues today would be valued around 85 per cent lower than it would have been five years ago.

The AI boom has stranded older business models

A significant driver of this shift has been the rise of generative artificial intelligence. The AI boom has redirected more than $250 billion into companies such as OpenAI and Anthropic, rendering the business models of pre-ChatGPT startups increasingly obsolete in the eyes of investors.

AI-powered agents — systems capable of executing tasks without human involvement — pose a direct threat to the software-as-a-service (SaaS) model, which typically charges customers based on the number of employees using the software.

David Zhu, former head of engineering at DoorDash and now at AI sales platform Reevo, described his view following the arrival of ChatGPT in blunt terms: "All workflow-driven enterprise SaaS companies will be either disrupted or dead in the next decade."

He added that businesses built before generative AI carry bloated staffing structures and legacy software that was designed for a different era, making meaningful transformation extremely difficult.

"Unless they make a stark, 180-degree pivot to rebuild the exact same thing from scratch, they're going to slowly fail," Zhu said.

Software-as-a-service firms make up the largest share of fallen unicorns, with 75 companies on the list — twice as many as those in the financial technology sector.

Household names among the fallen

Several well-known consumer brands that came to define the direct-to-consumer boom of the previous decade are among those now counted as fallen unicorns.

These include beauty brand Glossier, footwear company Rothy's, home linen retailer Brooklinen, and Savage X Fenty, the lingerie label founded by Rihanna.

Startups that flourished during the podcast and wellness era have also been caught up in the downturn. These include supplement brand AG1, robo-advisory investment platform Betterment, ticketing startup SeatGeek, and drone manufacturer Skydio — which PitchBook estimates has fallen from a valuation of more than $2.5 billion to approximately $509 million.

A Skydio spokesperson rejected that figure, whilst AG1 declined to comment. Reuters subsequently reported that AG1 was exploring a sale at a valuation of $2 billion, inclusive of debt.

Acquisitions reflect the new reality

The decline in valuations is also evident in recent acquisition activity. Investment app Stash was sold to Grab in February for $425 million — considerably below the $660 million that had been invested in the company.

In a separate deal, fintech startup Step was acquired by MrBeast for an undisclosed sum reported to be below the $500 million the company had raised in funding.

Before the downturn, a widely accepted rule of thumb in the technology sector held that an acquisition price of roughly $2 million per engineer — for a company with 100 engineers — would typically yield a sale price of between $200 million and $300 million, regardless of revenue. That calculus no longer holds in the current environment.