The term "unicorn" used to mean something mythical. Back in 2013, when Aileen Lee of Cowboy Ventures coined the phrase, it described a software startup valued at over $1 billion. It was a rare beast. Seeing one was an event. Fast forward a decade and the herd became a stampede. We had decacorns, hectocorns, and companies reaching billion-dollar valuations before they even had a finished product. But the party ended. We are currently witnessing the death of a unicorn phenomenon on a scale that honestly feels a bit like a correction from a fever dream.
It isn't just about bad luck. It's a fundamental shift in how money works. For years, interest rates were basically zero. Investors were desperate for returns, so they threw cash at anything that promised "disruption." Efficiency didn't matter. Growth did. If you could show a chart going up and to the right, you got a check. But when the Federal Reserve started hiking rates, the "growth at all costs" model evaporated. Suddenly, losing $50 million a quarter to acquire customers wasn't "blitzscaling"—it was a suicide mission.
The Reality of the Death of a Unicorn
When we talk about the death of a unicorn, it’s rarely a sudden explosion. It’s more of a slow, painful deflation. Take a look at Convoy. This was a digital freight network backed by the likes of Jeff Bezos and Bill Gates. At its peak, it was valued at $3.8 billion. It was supposed to be the "Uber for trucking." In late 2023, it collapsed almost overnight. They couldn't find a buyer, and the capital markets had completely dried up.
Why? Because the unit economics didn't make sense without endless subsidies.
Then you have the "down round." This is a fate some founders consider worse than death. It’s when a company raises money at a lower valuation than their previous round. It crushes employee morale because their stock options go underwater. It signals to the market that the hype was fake. Klarna, the "buy now, pay later" giant, saw its valuation slashed from $45.6 billion to $6.7 billion. That is an 85% haircut. While Klarna survived, many others in that position simply fold under the weight of their own liquidation preferences.
Why the Herd is Thinning
It’s easy to blame the economy. It’s harder to admit that many of these companies were never actually viable businesses. They were financial products.
Venture Capital (VC) is built on the "power law." VCs know that 90% of their investments will fail, but they hope the 10% will pay for the rest. This encourages founders to take massive risks. If you’re a founder and you’re told to "go big or go home," you spend money like it’s water. You hire 500 people when you need 50. You rent a flashy office in SoMa or Shoreditch. You spend millions on Super Bowl ads.
When the music stops, you're left with a massive burn rate and no path to profitability.
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Look at Veev. They were a construction tech unicorn that raised over $600 million. They wanted to reinvent how houses were built using modular panels. Great idea. Real innovation. But they ran out of cash in a high-interest-rate environment where "moonshots" are no longer tolerated. They shut down in late 2023. The death of a unicorn in this case was a tragedy of timing. Had they launched in 2016, they might have stayed private long enough to figure it out. In 2024 and 2025, the market demands EBITDA, not dreams.
The Problem with Liquidation Preferences
Most people don't understand the "dirty" side of unicorn valuations. When a startup says they are worth $1 billion, that doesn't mean every share is worth that much. VCs often get "liquidation preferences." This means if the company sells or shuts down, the investors get their money back first, plus interest, before the founders or employees see a dime.
If a company raises $500 million at a $1 billion valuation but then sells for $400 million, the employees get zero.
This creates a "zombie unicorn" scenario. The company is technically alive. It has a high valuation on paper. But because it can't sell for more than the total amount of preference debt, it's essentially a dead man walking. Founders are trapped. They can't exit, and they can't raise more money without wiping themselves out. This is the quiet death of a unicorn that doesn't make the TechCrunch headlines until the final bankruptcy filing.
High-Profile Casualties and What They Teach Us
We have to mention WeWork. It’s the ultimate cautionary tale. Adam Neumann’s "community-focused" office space company was once valued at $47 billion by SoftBank. It was the peak of the unicorn bubble. When the S-1 filing for their IPO came out, the world saw the truth: it was just a real estate company with a lot of debt and some very expensive kombucha taps.
WeWork eventually filed for Chapter 11. It was a spectacular death of a unicorn that changed the industry forever. It forced VCs to actually look at balance sheets again. Imagine that.
- Olive AI: Once valued at $4 billion to automate healthcare tasks. Shut down after failing to deliver on its tech promises.
- Zume Pizza: The robot pizza truck company. Raised nearly $500 million. They couldn't keep the cheese from sliding off the pizzas during delivery. It turns out, some problems don't need a "tech" solution.
- SmileDirectClub: A public unicorn that went from a multi-billion dollar valuation to a total shutdown.
These aren't just names on a list. They represent thousands of layoffs. They represent billions of dollars in lost capital that could have gone to sustainable businesses.
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The "Bison" is the New Unicorn
The industry is pivoting. You’ll hear people talk about "zebras" or "camels" or "bisons" now. These are companies that focus on profitability, resilience, and steady growth rather than explosive, subsidized expansion. Honestly, it's a healthier way to build a business.
The death of a unicorn isn't necessarily a bad thing for the ecosystem. It clears the forest floor. It stops the "war for talent" where companies with no revenue offer $400k salaries to junior engineers just because they have VC cash to burn. It brings sanity back to the market.
How to Spot a Unicorn in Trouble
If you’re an employee or an investor, you need to look for the red signs.
- Multiple pivots in a short time: If a company goes from "AI-driven logistics" to "Web3 marketplace" to "Climate tech" in 18 months, they are lost.
- The "Perks" disappear: It starts with the free snacks. Then the travel budget. Then the layoffs.
- Secondary market activity: If the company’s stock is trading at a 70% discount on platforms like Forge or Hiive compared to its last official round, the market knows something you don't.
- Executive turnover: When the CFO leaves suddenly, pay attention. The CFO is the person who sees the bank account every day.
The death of a unicorn is often preceded by a desperate attempt to "find a path to profitability." But you can't just flip a switch and become profitable if your entire business model relies on selling a dollar for 75 cents.
The Role of SoftBank and Tiger Global
We can't talk about this without mentioning the "mega-funds." SoftBank’s Vision Fund and Tiger Global changed the game by pumping billions into startups at record speeds. This created "artificial" unicorns. When you have that much cash, you can steamroll competitors. But you also remove the natural selection process of the free market.
Companies didn't have to be good; they just had to be funded.
Now that Tiger and SoftBank have pulled back, these companies are left without their primary source of life support. They are like deep-sea fish brought to the surface; the pressure change is killing them.
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Actionable Steps for the Current Market
The era of easy money is over. If you are involved in the startup world—whether as a founder, employee, or observer—here is how to navigate the current death of a unicorn cycle.
For Founders: Focus on Default Alive
Paul Graham of Y Combinator famously asked if startups are "default alive" or "default dead." If you stopped raising money today, would you survive? If the answer is no, your only job is to change that. Cut the burn. Focus on your core product. Forget the valuation. A "down round" is better than a "zero round."
For Employees: Due Diligence is Your Job
Don't join a company just because it has a high valuation. Ask about the "runway." Ask about the "liquidation preference." If you have stock options, realize they might be worthless if the company has raised too much debt-like equity. You are an investor of your time. Treat your career like a portfolio.
For Investors: The Return of Due Diligence
The "FOMO" (Fear Of Missing Out) era is dead. Take your time. Look at the unit economics from day one. If the business doesn't make sense at a small scale, it won't magically make sense at a billion-dollar scale.
The Bigger Picture
The death of a unicorn is a natural part of the economic cycle. We are moving away from a "valuation-based" economy back to a "value-based" economy. It’s painful for those involved, but it's necessary for the long-term health of tech. We are seeing the end of the "tourist" founders and investors. What remains will be the companies that actually solve real problems for real people who are willing to pay real money for the solution.
Stay focused on the fundamentals. The unicorns might be dying, but the innovators are still very much alive. They're just working on things that actually work now. Look for the companies that are quietly making a profit while everyone else is mourning their paper wealth. That is where the next real giants will be found.