The hot social media network BeReal — which is gaining steam with young people as a casual alternative to Instagram — recently raised money, a key milestone on the path of any successful startup.
It had all the elements of a buzzy startup, like Snapchat, Clubhouse and Pinterest before it.
It was popular with college students and even beat out social media video rival TikTok on Apple's App Store. But when a report this month confirmed how investors valued the company, it was reportedly worth in the ballpark of $600 million — far short of the "unicorn" status of more than $1 billion many of its predecessors earned in frothier times.
A billion dollars may seem to be a big bet, but unicorn status for years has helped young companies attract employees and media attention, as well as offer founders runway to pursue new ideas and cachet with potential partners. Many now-established startups, such as Airbnb and Uber, that have shaken up longstanding industries depended on deep-pocketed investors to cover losses while they struggled to compete.
But BeReal's experience is representative of a new reality in Silicon Valley.
As employee layoffs, CEO resignations and belt-tightenings eliminate some of the excessive perks for which tech companies are known, investors here minted only 25 companies worth over $1 billion each in the third quarter of 2022, according to the venture capital research firm CB Insights. A year ago, there were more than five times as many new unicorns.
"It's going to get a ton of founders who shouldn't be doing it out of the ecosystem — people doing it for money and fame," said the venture capitalist Paige Craig, who invested in companies including Twitter and Lyft.
As interest rates spike and concerns over a global recession send shudders through the economy, tech companies big and small are slowing hiring and cutting new investments.
Google's CEO has implored his workers to show "more hunger," and thousands of startup employees have lost their jobs over the past six months. Tech company stock prices — which had marched steadily upward over the past decade — finally have fallen back to earth.
The amount of venture capital funding going into late-stage startups fell nearly 50% in the third quarter compared with the second quarter, according to the venture capital research firm PitchBook Data.
More than a decade ago, the $1 billion unicorn startup became an aspirational marker of success in Silicon Valley. It reflected the exuberance and optimism of a near-mythical bastion of the economy where the boom times never seemed to end.
