By: John S. Morlu II, CPA
Introduction
In the wild world of startups, unicorns once roamed free, glittering symbols of innovation and wealth. But today, those billion-dollar beasts are stuck in the world’s slowest parade, unable to exit, with investors holding their breath and crossing their fingers for an IPO miracle. Welcome to the great startup traffic jam, where venture capitalists are babysitting unicorns that refuse to graduate, and Limited Partners are closing their wallets like it’s 2008 all over again.
If you’ve ever wondered why the tech world seems to be at a standstill, or why companies worth the GDP of entire countries are stalled in limbo, this write up takes you on a satirical journey through the chaos. From the bizarre economics of unicorns to the hilarious reality of dog horoscope apps with billion-dollar valuations, we’ll unravel the absurdity of today’s startup ecosystem.
These chapters dive into the funny, the frustrating, and the utterly mind-boggling state of tech exits — because sometimes, it’s better to laugh than to cry. Buckle up for a wild ride through the slow-motion disaster that is the modern-day startup exit market. And hey, by the end, you might just want to invest in my blockchain-powered kombucha company.
Chapter 1: A Parade of Glittering Unicorns (in Traffic)
Picture this: a Silicon Valley highway clogged with unicorns—those mythical startups valued at over $1 billion. Except these unicorns aren’t galloping towards glory. They’re stuck in the world’s longest traffic jam. Some of them have been idling there for over nine years, according to PitchBook. At this point, they resemble tired donkeys draped in glittery onesies, waiting for a rescue tow to the nearest exit ramp, aka the IPO or acquisition.
What’s happened to the once-majestic beasts of innovation? Why are they gridlocked? It’s not just bad traffic management; the venture capital (VC) world has hit a bottleneck. Limited Partners (LPs), the very folks who fund VCs, have become spooked, opting to close their wallets tighter than a clam at a seafood market. The reason? LPs are experiencing a troubling déjà vu, reminiscing about 2008 when fears of losing homes overshadowed concerns over missing the next big app sensation.
The result? A staggering 57,674 companies stuck in a limbo of “too big to die, too small to succeed.” Picture VCs squinting at their portfolios like exhausted parents watching their kid fail to graduate year after year, clinging to the hope that “he just needs a bit more time!” Meanwhile, angel investors—the cool aunts and uncles who once slipped startups a quick $50K here and there—have vanished from the scene. Only 45.5% of the angels who were active in 2021 are still cutting checks today. Turns out even the most benevolent investors have their limits.
Chapter 2: The Financial Unicorn Herd
How many unicorns are stuck in this existential limbo, you ask? According to PitchBook, the collective value of these startups now totals a staggering $2.5 trillion. That’s right—trillion. To put this in perspective, that’s roughly the GDP of France. Imagine an entire country’s worth of tech companies, all dressed up with no place to go, wandering around, waiting for someone to wave the magical IPO wand and free them from purgatory.
But there’s a catch: nearly 40% of these companies have been in their VCs’ portfolios for almost a decade. You could’ve binge-watched every season of Game of Thrones twice during the time these unicorns have been languishing, waiting for an exit. If unicorns were athletes, they’d be on their fourth coach, still discussing their “potential” while struggling to stay off the bench.
And it’s not just the startups feeling the heat. VCs, who were once riding high on the backs of these companies, are now feeling the pressure. The backlog of companies yet to exit has hit record levels. With LPs tightening their belts, venture capitalists find themselves holding the bag—or rather, holding the unicorns—waiting for a miracle that may never come.
Chapter 3: Fun Facts From the World of Stuck Unicorns
Let’s break this down with some outrageous facts that reveal the absurdity of this situation:
• If unicorns were their own country, they’d be one of the largest economies in the world. Imagine a place where your GDP is based on apps offering same-day burrito delivery or pet meditation services.
• The number of startups stuck waiting for an exit is so high, it’s like every restaurant in America trying to give you the check at once. With nearly 60,000 companies in backlog, some will still be raising bridge rounds when we’re all commuting via self-flying Uber air taxis (which, let’s be honest, will probably still be stuck in traffic too).
• The last time LPs were this stingy with cashbacks, Ugg boots were all the rage, and the first Iron Man movie had just hit theaters. Yes, 2008 called, and it wants its recession vibes back.
Chapter 4: So, What’s the Hold-Up?
The big question on everyone’s mind is: Why aren’t these unicorns exiting? Shouldn’t the combination of big money, innovation, and rampant tech optimism guarantee success? Well, not exactly.
Here’s the hard truth: not every company that dreams big is destined to succeed. Gone are the days when you could slap together an app that matches dogs based on their astrological signs and expect to score $500 million in funding. Investors are now more discerning (maybe just a smidge), and some startups simply aren’t delivering the growth needed to justify their billion-dollar valuations.
It turns out that sometimes, companies need more than a hockey-stick growth curve on their pitch decks to survive. And when that hockey stick morphs into a wet noodle, well, it’s time to face reality. Maybe that dog horoscope app wasn’t such a brilliant idea after all.
Chapter 5: The VC Dilemma: Too Big to Fail, Too Small to Succeed
Venture capitalists now find themselves in a difficult position. They’ve poured millions (and in some cases, billions) into these companies. But what happens when you’re sitting on a unicorn that’s been grazing in your portfolio for nine years and still hasn’t found an exit? You polish it up and hope for the best, of course.
VCs have a vested interest in making these companies succeed—or at least making it appear they might succeed eventually. It’s like buying a lottery ticket every year for a decade, hoping that this time your numbers will come up. But here’s the kicker: If these unicorns don’t find a way out, the VCs don’t get paid. And if VCs don’t get paid, LPs don’t get paid. And if LPs don’t get paid… well, you can see how this spirals.
Chapter 6: A Return to Common Sense (Maybe)
So what’s the solution to this great startup exit traffic jam? A little common sense might be a good place to start. Perhaps not every startup needs to exist. Maybe not every company dreaming of IPO riches will make it. And perhaps, just maybe, there are too many apps attempting to solve problems that don’t really exist.
VCs, LPs, and startups alike must get real about the value they’re creating. If the only thing standing between your unicorn and a successful exit is another bridge round or a bit more insider funding, it’s time to start rethinking your strategy.
Chapter 7: The Long Road Ahead
Until then, we’re all in for a prolonged wait. Startups will continue spinning their wheels, VCs will keep polishing their unicorns, and LPs will cross their fingers that something—anything—will go public before the next global crisis strikes.
In the meantime, anyone want to invest in my blockchain-enabled AI-powered kombucha startup? Sure, there’s no exit in sight, but at least we’ve got delicious fermented drinks to keep us going. Cheers to the longest unicorn parade in history!
As we look toward the horizon, it’s clear that this traffic jam of creativity and ambition isn’t just a passing storm; it’s a moment of reckoning for the entire startup ecosystem. Each unicorn stuck in the mud represents not just lost potential but also the collective dreams of entrepreneurs who dared to dream big. These aren’t just business ventures; they’re the hopes of innovators, the passion of creators, and the financial lifelines for employees who believed in the mission.
However, the current state of affairs cannot continue indefinitely. The startup world is nothing if not dynamic. As the traffic lights flicker and the world of venture capital starts to shift, the long road ahead may also hold opportunities for evolution and transformation. Perhaps we’ll see a wave of consolidation, where the glittery onesies of many startups will merge to create more robust entities better equipped to survive in this challenging landscape. Or maybe, just maybe, a new breed of investors will emerge—those willing to take calculated risks on smaller, scrappier startups that have been overlooked during this wave of cautious investing.
With the specter of past financial crises looming large, the ecosystem must pivot. Founders might need to reevaluate their business models and marketing strategies, focusing on sustainable growth rather than chasing the next big valuation. We may witness the rise of the “Pragmatic Unicorn,” where the emphasis shifts from outrageous valuation to operational excellence. Instead of hoping for a mythical IPO to solve all problems, these pragmatic unicorns will thrive on fundamentals, embracing profitability and a loyal customer base.
The beauty of innovation is that it adapts. Just as startups have risen to address challenges in the past, they will continue to find creative solutions to navigate this current landscape. Whether that means embracing new technologies, pivoting to meet market demands, or finding unique ways to monetize their offerings, resilience will be the name of the game.
And when the dust settles, what if the traffic jam clears? What if those unicorns, once mired in stagnation, suddenly find themselves with new avenues to explore? What if the market opens up, allowing a wave of IPOs that sends the startup community into a frenzy of renewed hope and excitement? The potential for transformation lies in the air, and it’s only a matter of time before the first unicorn breaks free from the gridlock.
So, as we raise a glass of that kombucha—fermented, delicious, and perhaps even symbolic of the gut health we need in the industry—let’s remember that every unicorn parade has its end. It’s a long road ahead, filled with uncertainty and a few potholes, but also the promise of new beginnings. In the world of startups, where dreams meet reality, the next chapter is always waiting to be written.
Here’s to the dreamers, the innovators, and the weary travelers stuck in the parade of glittering unicorns. May we all find our exits—whether through a triumphant IPO, a strategic acquisition, or perhaps a bold pivot that leads us to a destination even more magnificent than we ever imagined. Cheers to resilience, reinvention, and the belief that sometimes, even the longest wait can lead to the most extraordinary outcomes.
Author: John S. Morlu II, CPA is the CEO and Chief Strategist of JS Morlu, leads a globally recognized public accounting and management consultancy firm. Under his visionary leadership, JS Morlu has become a pioneer in developing cutting-edge technologies across B2B, B2C, P2P, and B2G verticals. The firm’s groundbreaking innovations include AI-powered reconciliation software (ReckSoft.com) and advanced cloud accounting solutions (FinovatePro.com), setting new industry standards for efficiency, accuracy, and technological excellence.