Global Top 100 Unicorns

Foreword

2023 has been dominated by a continuation of the hawkish monetary policy and sustained global macroeconomic and geopolitical uncertainty felt through much of 2022. This has resulted in challenging market conditions with a marked change to the abundant liquidity and high valuations achieved by growth companies in 2021 and early 2022. Combined with a moribund deals market, movement in the top 100 Unicorns this year was comparatively low - with 79% of the top 100 Unicorns having no change in valuation during the year and only two of the top 100 being able to execute an IPO.

Where there have been funding rounds in the year, investors have experienced mixed fortunes. For all Unicorns, there were 25 down rounds, including 11 of more than $1bn; the largest reductions in value impacting companies closely connected to the consumer industry as the cost of living continued to impact households. The significant valuation increases in the year came as a result of a surge in interest for AI and machine learning, one AI company entered the unicron list for the first time, diving into the top five with a valuation of $85bn. The valuation of this particular AI company ensured that the aggregate value of the top 100 only fell $10bn despite the headwinds facing private markets. As a point of contrast, the MSCI World Index was up 9.3% over the equivalent period, driven by big tech and AI chip makers. The index, however, has still not recovered entirely from the 2022 sell off.

Outlook

We have seen companies and their investors shifting attention away from investing capital to capture market share at the expense of margins, to deploying capital in a structured way to drive sustainable growth. This will have allowed companies to extend cash runway in order to delay a funding round that would have otherwise been completed in the year. The markets are indicating, whether based on rumoured near-term funding rounds or investors writing down investments, that we will see further down rounds in the medium term unless the wider macroeconomic environment improves. For now, we expect investors will largely focus on investing in companies that have a clear path to being cash generative, have recurring revenues and a solid track record. There are exceptions, however, particularly with regards to investments in megatrends such as CleanTech/energy transition and AI, which may benefit from investors being willing to pay notable growth premiums even in the current environment.

We will be watching closely as to how Unicorn valuations evolve over the next 12 months. After a subdued period we expect more liquidity events in the coming year as cash reserves continue to run down and Unicorn backers seek to realise investments. Companies and investors will likely need to reconcile themselves to the valuation reset that has occurred as the cost of money has risen. We expect investors renewed focus on companies that can deliver sustainable revenue growth alongside a clear path to profitability to continue. We may therefore see a new type of unicorn emerge in the coming year - Unicorn 2.0, a unicorn with more robust business, operating and financial models.

Michael Wisson
Partner, Capital Markets, PwC UK

Regional trends

Global

• The valuation of the Top 100 Unicorns decreased by $10bn <1% compared to more than a 30% valuation increase in the previous period.
• The overall regional split of the Top 100 Unicorns broadly remained unchanged, with some valuation uplift in US and China and its regions, offset by valuation declines across Europe and RoW.
• During the year ending 30 September 2023, there were a total of 104 new entries in the Unicorns club, compared to more than 480 new entries in the previous period.
  

^{Source: PitchBook Data, Inc with PwC analysis}

US

• The valuation of US Unicorns remained broadly unchanged from the previous year. To summarise the internal movements, new entrants in AI and Information Technology were offset by the IPO of two US Unicorns in 2023 as well as drop outs from FinTech.

China and its regions

• The valuation increase from this region in the Top 100 is primarily due to an AI driven social media platform recording a $40bn increase from its latest funding round in March-23.
• Although Chinese Unicorns in the Top 100 remained broadly unchanged, there was one noteworthy entry by a Chinese electric car company, as it moved up from its previous rank of 138 to 29 this year following its latest funding round in October 2022 valuing the company at $14bn.

Europe

• European Unicorns in the Top 100 declined slightly from the previous year, driven primarily by the dropouts of a food delivery service company and cybersecurity company following lower valuations in their latest funding rounds.

Rest of the world

• The valuation decrease in the RoW is mainly due to an online fast fashion retailer's valuation after its latest funding round in May-23, which reduced in value by $34bn reflecting the headwinds facing consumer oriented businesses due to cost of living challenges from rising inflation and interest rates.

^{Source: PitchBook Data, Inc with PwC analysis}

Top 100 Unicorns composition by value

The number of Hectocorns and their constituents remained unchanged this year. An AI powered social media company secured the top rank after its most recent funding round in March 2023.