The term used to mean something magical. Back in 2013, when Aileen Lee coined the phrase "unicorn," it described a private startup valued at $1 billion or more—a statistical anomaly, a beast so rare you’d likely never see one in the wild. Fast forward to the mid-2020s, and the herd has grown massive, bloated, and frankly, a bit sickly. We aren't just seeing one or two failures anymore. We are witnessing the systematic death of a unicorn as a recurring financial event that ripples through pension funds, employee 401(k)s, and the very fabric of Silicon Valley’s reputation.
It’s messy. When a billion-dollar company goes to zero, it isn't like a small business closing its doors. It’s a controlled demolition that often isn't very controlled at all. You’ve seen the headlines about WeWork’s descent from a $47 billion peak to bankruptcy court, or the spectacular implosion of FTX. But those are just the loudest crashes. Beneath the surface, hundreds of "soonicorns" and mid-tier giants are quietly running out of runway, proving that a valuation is just a number on a piece of paper until someone actually buys the shares.
What Actually Happens During the Death of a Unicorn?
It starts with a "down round." That's the first omen. A company that was valued at $2 billion two years ago suddenly needs cash, but investors will only give it to them at a $500 million valuation. On paper, that’s a failure. In reality, it’s a desperate gasp for air. When a company can’t even secure a down round, the death of a unicorn begins in earnest.
Liquidation preferences kick in. This is the part most employees don't understand until it’s too late. Venture capitalists (VCs) often have "last-in, first-out" rights. If a company sells for $100 million but raised $200 million in debt and preferred stock, the founders and the engineers get nothing. Zero. The "unicorn" status was a mirage that only benefited the people who wrote the checks, not the people who wrote the code.
Take the case of Veev, a modular construction startup once valued at over $1 billion. It shuttered abruptly in late 2023 because the capital markets dried up. It didn't matter that they had innovative technology; what mattered was the "burn rate." If you spend $10 million a month and only make $2 million, you are on a countdown timer. When that timer hits zero, the lights go out. It’s brutal, it’s fast, and it leaves a lot of talented people looking for work on LinkedIn with "Open to Work" banners overnight.
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The Interest Rate Reality Check
Why is this happening so much more now? Simple: money isn't free anymore. For a decade, the Federal Reserve kept interest rates near zero. Investors couldn't make money on bonds, so they threw cash at anything that looked like it might grow fast. This created a "growth at all costs" mentality.
But when the Fed hiked rates to combat inflation, the math changed. Suddenly, a dollar today is worth more than a theoretical five dollars in ten years. Investors stopped asking "How fast are you growing?" and started asking "When will you actually make a profit?" Most unicorns didn't have an answer. They were built on subsidized growth—using VC money to sell a product for $1 that cost $2 to make.
Mismanagement and the "Founder Myth"
We love a visionary. We love the college dropout in a hoodie who promises to change the world. But that mythology often masks deep structural rot. Look at Olive AI. At one point, it was the darling of healthcare tech, valued at $4 billion. It promised to use AI to automate boring hospital paperwork. Instead, it over-extended, bought too many companies, and couldn't integrate them. By the time the death of a unicorn arrived for Olive in late 2023, it was selling off its parts like a salvaged car in a junkyard.
The ego of the founder is often the catalyst. When you're told you're a genius by everyone with a checkbook, you stop listening to the CFO. You hire 1,000 people when you only need 200. You rent a flashy office in Manhattan. You spend millions on Super Bowl ads. Then, the market shifts, and you realize you've built a house of cards in a windstorm.
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The Human Cost: It's Not Just Numbers
When we talk about the death of a unicorn, we tend to focus on the VCs losing their shirts. Honestly? Don't cry for them. They have diversified portfolios. The real tragedy is the workforce.
Imagine you're a mid-level manager at a high-flying startup. You took a lower salary in exchange for stock options because the "strike price" suggested you'd be a millionaire by 35. You worked 70-hour weeks. You missed birthdays. Then, the company collapses. Not only is your stock worth zero, but the "prestige" of having that company on your resume has turned into a giant red flag. Recruiter sentiment shifts fast. One day you're a "high-growth veteran," the next you're "part of that mess that blew up."
- Financial Ruin: Employees who exercised options and paid taxes on "paper gains" can end up owing the IRS money for wealth that no longer exists.
- Trust Deficit: Every time a giant fails, it becomes harder for the next good idea to get funding.
- Market Contraction: Local economies in tech hubs like Austin, SF, or New York feel the squeeze when the catering orders and office leases vanish.
Survival of the Fittest (or the Most Boring)
Not every unicorn is destined for the grave. The ones surviving right now are doing something radical: they are acting like actual businesses. They are cutting costs, focusing on "unit economics," and—heaven forbid—trying to earn a profit.
Companies like Stripe or Databricks have faced valuation cuts, sure, but they have real revenue and real customers. They are "Centars" (a term for startups with $100 million in Annual Recurring Revenue). The death of a unicorn usually only claims the ones that were all hype and no substance. If your "tech" company is actually just a laundry service with an app, you're in trouble. If you actually build infrastructure that the world needs, you'll probably weather the storm, even if your valuation takes a haircut.
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Spotting the Warning Signs
If you’re looking at a company—either as an investor, an employee, or a fan—how do you know if the end is near? There are patterns. They aren't always obvious, but they're there.
First, look at the executive turnover. If the CFO and the Head of Product leave within three months of each other, run. They've seen the books, and they don't like what they see. Second, watch for "pivots." If a company suddenly claims to be an "AI-first" business when they were a "crypto-first" business six months ago, they are chasing trends to please investors, not solving problems.
Lastly, pay attention to the transparency. Healthy companies share data. Dying unicorns hide behind "vanity metrics" like "total users" or "gross merchandise volume" instead of telling you how much cash they are actually keeping. If the math feels fuzzy, it’s because it is.
Moving Forward in a Post-Unicorn World
The era of "easy money" is over. We are entering a period of "hard tech" and "sober growth." This is actually a good thing for the economy in the long run. It weeds out the scams and the poorly managed experiments.
If you are an employee at a high-valuation startup, you need to be proactive. Don't wait for the "all-hands" meeting where they announce layoffs. Ask the hard questions now. What is the runway? What is the path to profitability? If the leadership gives you word salad instead of numbers, start updating your resume.
Actionable Steps for the Current Market
- For Employees: If you have stock options, do not exercise them unless the company has a clear path to an IPO or acquisition. Tax liabilities on worthless stock have ruined lives.
- For Investors: Focus on "Capital Efficiency." Look for companies that have a high ratio of revenue to venture capital raised. A company that made $50M on $10M of funding is much safer than one that made $50M on $500M of funding.
- For Founders: Forget the $1 billion mark. It's a vanity metric that puts a target on your back. Focus on "Default Alive"—the state where your business can survive indefinitely without ever raising another dollar from an outside investor.
The death of a unicorn is a painful, necessary part of the economic cycle. It’s a clearing of the brush that allows new, sturdier trees to grow. We might miss the excitement of the "blitzscaling" days, but a market built on reality is always better than one built on myths. Keep your eyes on the cash flow, stay skeptical of the hype, and remember that at the end of the day, a business is only worth what it earns.