More Early-Stage Startups Are Getting Minted As Unicorns

Just as it looks like the pace of creating new unicorns is once again picking up, so is minting them in earlier stages of funding.

Through July, 70 new unicorns — private companies valued at $1 billion or more — had been minted. Perhaps somewhat surprisingly, 28 of those companies were granted their unicorn horn after an early-stage funding round — defined as seed, Series A or Series B — an analysis of Crunchbase data shows.

That is only one shy of the 29 young unicorns created through all of last year — although still significantly off the pace in 2021 and 2022 when 107 and 77 early-stage unicorns were minted, respectively.

Back to old ways?

While this certainly isn’t 2021 again in the venture world, it is noteworthy that investors once again seem willing to invest at high valuations, even if the company is still relatively young in the maturation process.

Not too shocking, it is mainly AI leading the way. Nearly a dozen early-stage unicorns are generative AI or heavily AI-related startups. That list includes:

Elon Musk’s generative AI startup xAI, raised a $6 billion Series B in May that included investment from the likes of Valor Equity Partners, Vy Capital, Andreessen Horowitz and Sequoia Capital, and valued the company at $24 billion.
In February, China’s artificial intelligence startup Moonshot AI raised more than $1 billion in a Series B led by the Alibaba Group Holding and HongShan, formerly Sequoia Capital China.
In April, San Francisco-based Cognition reportedly locked up a $175 million Series A led by Founders Fund at a $2 billion valuation. The 6-month-old startup has developed an artificial intelligence-powered coding assistant called Devin.

However, not everything was AI-related when it came to minting early-stage unicorns. Perhaps the most eye-catching was that the much-maligned sector of Web3 saw three startups hit unicorn status after early-stage funding: Blockchain platform Berachain raised a $100 million Series B at $1.5 billion valuation; New York-based layer 1 blockchain Monad raised a $225 million Series A led by crypto investor Paradigm at a $1 billion valuation; and infrastructure platform Polyhedra Network has raised $20 million at a valuation of $1 billion.

In fact, a lot of sectors saw at least one startup hit the $1 billion-or-more valuation after an early funding, including retail (Uzum), space (Yuanxin Satellite) and defense (Saronic).

What it means

It’s hard to draw any big conclusions from the fact more early-funded startups are getting minted as unicorns than last year. However, it is telling that for the last several quarters investors have talked about valuations coming down and self-correcting — while on the other hand very young companies in the earliest stages of growth and funding are getting valued at $1 billion or more.

It could be only a momentary blip, as the first quarter of the year saw 17 early-stage unicorns minted, while in the second quarter that number dropped more than half to only eight (July saw three minted).

It was just a few years ago we saw investors — fearful of missing out on the next big thing — rush to fund companies at their most nascent stages at ridiculously high valuations.

That surely isn’t happening again so soon?