Older, More Impactful: Breaking Down The 2023 Class of Startup Unicorns
CB Insights released its list of 629 US Unicorn startups last week. Here are some of the key takeaways:
The US is producing fewer unicorns.
There are 98 fewer Unicorns in the US since 2022, down from 723, representing a 13.5% decline. This is largely attributable to an increase in interest rates and a consequent decline in venture capital
Most Unicorns are AI Unicorns-
348 of the startups with valuations of over $1billion define themselves as AI startups. There is an obvious and a not so obvious reason for this. The obvious reason is the explosive growth of generative AI and startups like OPEN AI and Jasper. But many industry-specific startups in healthcare, industrials, insurance, and financial services are more prominently featuring their use of AI.
Most Unicorn Founders are over the age of 45.
We estimate that 390 of 2023 Unicorn CEOs are over the age of 45. This fits into a long-running pattern that no one likes to talk about: the most successful entrepreneurs are 46 - despite the mythology that you are disqualified from entrepreneurship after you turn 31.
200 Unicorn Founders Used to Be Fortune 500 Executives
Another piece of Silicon Valley mythology is debunked yet again with the 2023 class of Unicorns. 200 of 2023 Unicorn founders spent the first half of their career in executive leadership in Fortune 500 companies. (Including Sam Altman of OPEN AI).
Unicorns are making more money solving more important problems.
Despite the emergence of the internet, social media, the blockchain and mobile devices, the United States has, in aggregate, been stagnating from an innovation perspective. (Economist Tyler Cowen calls this the Great Stagnation. The specific measurement of stagnation is total factor productivity.) Essentially, this means that the US produces less with more money, labor, and time. For example, it takes almost twice as long, with twice as many people, and twice as much money to build a bridge or a mile of highway today than it did in 1970.
The startups that have been doing well over the past 30 years have been producing things that we want - but don’t need. They make us binge-watch more tv, spend more time on social media, and order more stuff through e-commerce. This, in my view, is why the US has been stagnating while we experience unprecedented innovation.
Will These Unicorns Reverse The Great Stagnation?
What’s gives me hope about the 2023 class of unicorns is that they are innovating in industries like construction, healthcare, investment banking, insurance, and shipping which have been the leading culprits for the declines in total factor productivity in the US. They use more resources to produce a lot less than they used to.
284 of the 2023 Unicorns operate in industries which have seen the sharpest declines in total factor productivity. Does that mean that healthcare is going to be less expensive, construction less delayed, and banking less bloated? I’m more optimistic that the answer is yes than I was a year ago.
Pulling it all together
The 2023 class of unicorns are a bit more mature, are solving bigger problems, and using more AI than previous Unicorn classes. For the first time in a long time I’m optimistic that this might be the startup generation that reverses the great stagnation.
Y’all are my heroes,
Greg
Founder, CEO, Punks & Pinstripes
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