The Unicorn Fire Sales Ahead

Welcome back! 

Hopin, one of the most iconic startups of the pandemic era, said this week it sold its virtual event and webinar hosting business to RingCentral, and that its founder and CEO, Johnny Boufarhat, is stepping down. The sale marks a pitiful finale for the once-heralded startup.

Similar to Clubhouse, the chat app valued at $4 billion in 2021, Hopin had reached a unicorn valuation in record time before fetching a whopping $7.8 billion valuation in 2021. I’ll always remember it as the company that investors insisted was once in a generation, even after pandemic restrictions were lifted and it became clear virtual events would not be as popular in a post–Covid-19 world. For those investors, there was no room for doubt!

Fast-forward to 2023, and Hopin’s core business is worth just hundreds of millions, according to Axios—a fraction of its former price. But what appears to be the beginning of the end for Hopin hardly stands out in a sea of struggling startups. Slowly, an entire cohort of unicorns that raised capital effortlessly in 2020 and 2021 is dying or finding buyers at fire-sale prices. 

Berlin-based rapid-delivery company Gorillas, which raised more than $1 billion in venture capital funding during the peak of the bull market, struggled to survive once investors tightened the purse strings, for example. It sold to grocery app Getir late last year in a deal valued at $1.2 billion, well below its $3 billion peak valuation.

And it's not just companies with a billion-dollar valuation. As my colleague Natasha reported this week, storage startup Clutter, last valued at $600 million, ran out of cash last month. To stay alive, it struck a deal to be sold for pennies on the dollar to a business partner and existing backer, Iron Mountain. It had raised more than $300 million, according to PitchBook. Those on its cap table, which include SoftBank and Sequoia Capital, won’t be getting their money back. And Parade, an underwear startup that raised capital at a near $200 million valuation last year, is in talks to sell, my colleague Ann reported today. I expect, given the current dismal state for direct-to-consumer startups, that Parade’s sale price will be far less than its last valuation. 

These kinds of emergency M&A deals are the new normal. It’s a painful scenario for all parties involved. In Clutter’s case, its sale is also an example of how startups struggle to raise more VC when they hold so much debt—as well as immense challenges facing capital-intensive startups, a story foreshadowed last year by the collapse or retreat of several instant-delivery companies starting last year.

Hundreds of other unicorn startups will likely wrestle with a similar fate: They must find a shot-gun marriage or face collapse. As in past cycles, some of these could emerge as new companies—even successful ones. Hopin, since it sold its core virtual events business, is focusing on a new video streaming product, StreamYard. Some of Hopin’s later investors will remain shareholders in that new company, according to Axios. Andreessen Horowitz, General Catalyst and Tiger Global Management invested in its later rounds. But Hopin as we know it is dead in the water. A Hopin spokesperson declined to comment on its new valuation. Its new CEO Badri Rajasekar said in an emailed statement that the company has “a healthy and growing balance sheet” and “is in a great position to invest in growth.”

The growing list of disappearing startups raises the question about what founders and investors can learn from the recent past. Valuations, of course, were one signal: The number of unicorns had reached insane levels—roughly 600 were minted in 2021, according to Crunchbase. Only 44 reached billion-dollar valuations in the first half of this year.

There were other red flags. Hiring sprees that looked unsustainable in hindsight (such as Fast’s and Hopin’s) and heavy cash burn to attract customers were giveaways. Plus, as we later realized, several founders—such as Hopin’s Boufarhat, Bolt co-founder Ryan Breslow and MoonPay co-founder Ivan Soto-Wright—cashed out some of their holdings when they raised funding, a sign of the freewheeling investing climate of the last few years. These startups are now dealing with a painful reset since their last steep funding rounds. (Read the latest on MoonPay here.)

None of this should be news to investors: More than journalists or many of the startups’ own employees, venture capitalists had the best access to the financial conditions of these startups. The writing was on the wall.