An English poet once lamented, “golden boys and golden girls must, like chimney sweeps, also turn to dust”. The fate of pre-pandemic Silicon Valley unicorns, whose dreams of a wildly successful IPO amid the market mania of 2021 was deflated by a killer virus and the Powell Fed’s most draconian monetary tightening since the Volcker era may also turn to dust. This is as true in Palo Alto as it is in the Silicon Fens and the tech hubs of Israel, Bangalore, the Pacific Basin and MENA. Investors in hero to zero tech unicorns who missed the macro zeitgeist when the IPO window slammed shut in their face once the CPI surged to 9.1% and the chairman of the Federal Reserve finally grasped that inflation was not transitory, now stand to see a trillion dollars of wealth vaporize into money heaven. I know so many investors in the Gulf who fondly cling to the illusion that their obscenely priced AI puppies will finally hit IPO paydirt but I do not have the heart to tell them that their Champagne wishes and caveat dreams are pure self-delusion now, that the market gods have cursed their portfolio offspring, who are destined lose 90% of their last round valuations.
The VC cognoscenti in the Valley are only interested in funding a handful of AI startups, whose high octane valuations simply do not correlate with reality. The one thousand plus me-too startups that boasted at least a billion-dollar val during the Covid tech mania of 2021 have no real hope of either becoming self-sustaining before the cash in the kitty runs out and zero prospects to raise money from the kindness of strangers even in savage down rounds.
Fake eggs, impossible meatless meat, e-real estate, fintech galore, fake digital banks, some financed by the billionaires of the Gulf via South Asian retail bankers turned VCs and pet grooming market places, countless other business models that raised funding in the mania can no longer tap the markets as interest rates will stay higher for longer in a stealth bond bear market. Data, like Shakira’s hips, doesn’t lie. A pathetic six out of the 400 Class of 2021 unicorns have executed an IPO. At least another 1200 unicorns are now in the twilight zone, moon walking like zombies towards an IPO window that has snapped shut for them. Trump-Shrump makes no difference, these puppies are headed for the financial slaughterhouse.
I see a number of M&A deals in software but investors in 2021 vintage rounds will be lucky to get even 30% of their money back and the SPAC guys should consider 5 cents on the dollar as a happy ending. Death comes suddenly and often to Valley unicorns as the collapse of the $4 billion e-freight firm Convoy and AI startup Forward Health are now both dead meat.
WeWork was once the alpha doggy of real estate and valued at $47 billion by J.P. Morgan until it proved to be a ponzi scheme, a fraud and a scam. SoftBank’s $100 billion pre-IPO Vision Fund financed with $60 billion petrodollars from the GCC sovereign wealth elite was gutted by the collapse of its best and brightest unicorns. But the mass extinction event for this doomed asset class will happen in 2026 and 2027. The lights will go out in Silicon Valley and Get Shorty is my strategy du jour. RIP unicorns, we sure loved you since you were so common while humankind battled our generation’s Black Death.
Also published on Medium.
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