The Impact of COVID-19 on the Unicorn Marketplace
The outbreak of COVID-19 has had a profound impact on businesses worldwide. In the tech industry, we see the effects in several ways. This blog post will examine how the pandemic has impacted unicorns — startups with $1 billion or more valuations.
Unicorns before COVID-19
Unicorns have been a hot topic in the business world for the past few years. In 2018, there were a record 191 unicorn companies globally, with a combined value of $2.3 trillion. This figure has more than doubled since 2017, when there were only 79 unicorn companies with a combined value of $1 trillion.
The pandemic has put an end to this rapid growth. Several well-established unicorns have tried to raise equity at the beginning of the year but have yet to be plugged as they saw possible down rounds. A down round is when a company raises money at a lower valuation than in its previous funding round. This risks the engine as recruiting, talent retention, M&As, and earlier investors' liquidation preference become more complex.
The impact on talent retention
Talent retention will be one of the key areas affected by COVID-19. As packages need to be restructured — i.e., more cash (margin consumption) or stock (dilution) — we're already seeing some startups dipping into their cash reserves to keep employees onboard. This…
