Many unicorns from the zero-interest-rate period haven't raised since 2022 because they are in a strategic holding pattern. Unable to raise without a valuation hit or exit, their playbook is to use existing cash to grow organically and hope profitability eventually justifies their last-round valuation.
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The time for a new company to challenge an incumbent has compressed dramatically. As private market timelines extend, many unicorns that haven't gone public are already being 'eaten away' by the next wave of startups, creating a significant liquidity challenge for their late-stage investors.
Despite seeing 100x revenue multiples reminiscent of 2021, VCs are not accelerating their fund deployment or rushing back to fundraise. This more measured pace indicates a potential lesson learned from the last bubble, where rapid deployment led to poor vintage performance and pressure from LPs.
While first-time founders often optimize for the highest valuation, experienced entrepreneurs know this is a trap. They deliberately raise at a reasonable price, even if a higher one is available. This preserves strategic flexibility, makes future fundraising less perilous, and keeps options open—which is more valuable than a vanity valuation.
A significant shift has occurred: private equity firms are no longer actively pursuing acquisitions of solid SaaS companies that fall short of IPO scale. This disappearance of a reliable exit path forces VCs and founders to find new strategies for liquidity and growth.
Top-tier private companies like Stripe and Databricks are actively choosing to delay IPOs, viewing the public market as an inferior "product." With access to cheaper private capital and freedom from quarterly scrutiny and activist investors, staying private offers a better environment to build long-term value.
The first question in any fundraising or M&A discussion is always, 'What was your last round price?' An inflated number creates psychological friction and can halt negotiations before they begin. Founders should optimize for a valuation that allows for a clear up-round, not just the highest price today.
Accepting too high a valuation can be a fatal error. The first question in any subsequent fundraising or M&A discussion will be about the prior round's price. An unjustifiably high number immediately destroys the psychology of the new deal, making it nearly impossible to raise more capital or sell the company, regardless of progress.
Valuations don't jump dramatically; they 'sneak up on you.' An investor might balk at a $45M cap when they expected $40M. But the fear of missing a potential unicorn is stronger than the desire for a slightly better price, causing a gradual, batch-over-batch inflation of valuation norms.
For startups experiencing hyper-growth, the optimal strategy is to raise capital aggressively and frequently—even multiple times a year—regardless of current cash reserves. This builds a war chest, solidifies a high valuation based on momentum, and effectively starves less explosive competitors of investor attention and capital.
The founder advises against always pursuing the highest valuation, noting it can lead to immense pressure and difficulties in subsequent rounds if the market normalizes. Prioritizing investor chemistry and a fair, responsible valuation is a more sustainable long-term strategy.
