220 unicorn startups have lost their billion-dollar status. Here’s why

More than 220 American startups that once hit billion-dollar valuations are now classified as "fallen unicorns", according to PitchBook data provided exclusively to CNBC.

Startups that last raised funding in 2021 are worth 68% less on average today; those that raised in 2022 have seen a 52% decline. Nearly half of all 857 US unicorns haven't raised fresh capital in three years.

The AI boom that has redirected more than $250 billion into OpenAI and Anthropic has made pre-ChatGPT business models look stranded.

Those that have been struck down include iconic consumer brands that epitomised the direct-to-consumer trend of the decade, including Glossier, Rothy's, Brooklinen, and Savage X Fenty, Rihanna's lingerie company.

Also included on the list are podcast era darlings, including supplement brand AG1, investment management robo-advisor Betterment, ticketing startup SeatGeek, and drone manufacturer Skydio, which PitchBook claims has gone from being valued at more than $2.5 billion to now worth about $509 million.

The Skydio spokesperson rejected this figure, while AG1 declined to provide a comment, but Reuters subsequently reported the brand was looking to sell itself at a valuation of $2 billion inclusive of debt. Software-as-a-service firms dominate the list, with 75 companies, twice as many as financial technology.

AI-powered agents, who don’t need humans to carry out tasks, threaten to disrupt the software-as-a-service business model, where charges are based on employee usage. DoorDash former head of engineering at AI sales platform Reevo David Zhutold 

his working thesis after the ChatGPT moment was stark: "All workflow-driven enterprise SaaS companies will be either disrupted or dead in the next decade."

Companies built before generative AI carry bloated staffing models and software designed for a pre-AI world, making genuine transformation difficult. "Unless they make a stark, 180-degree pivot to rebuild the exact same thing from scratch, they're going to slowly fail," Zhu said.

Without AI, for a tech company with 100 engineers, an acquisition price of around $2 million per engineer guaranteed an acquisition price of $200-$300 million irrespective of the revenue generated by the company.

The valuations have declined by about six times since the 2021 highs, which implies that a company with similar revenues will be valued 85% lower now compared to five years back, according to Ryan Falvey of Restive Ventures.

The numbers can be seen from recent acquisitions, where the investing app Stash was sold to Grab for $425 million in February, much below the $660 million invested in it. In another deal, fintech Step was acquired by MrBeast at an unspecified amount below its $500 million fundraising.