Silicon Valley Has a Problem with Zombie Unicorns

The once-thriving startup boom is over, leaving behind former unicorns that can no longer reach their peak valuations. In Silicon Valley, they are referred to as "fallen unicorns" or even "zombie unicorns": they still exist, but they are not doing well. The Economist calls them "undead".

Times Are Changing – Even for Startups

Just a few years ago, there was a real hype around startups. In 2022 alone, according to The Economist, $223 billion flowed into venture capital (VC) funds, the primary financiers of emerging tech companies.

The result: alongside "unicorns," or startups valued at one billion dollars or more, some companies also achieved the status of "decacorn" (valuation over ten billion dollars) or even "hectocorn" (valuation over one hundred billion dollars).

Now, the glorious times are over. In 2025, VCs raised only $66 billion, and many unicorns are no longer reaching their peak valuations. But what is the reason for this?

More Dead than Alive: Here Are the Reasons

One reason is likely the fact that many startups were overvalued from the start and assigned inflated valuations. "Low interest rates encouraged investors searching for higher returns to generously support venture capital funds," explains The Economist. This led to startups with low revenues or questionable business plans being assigned high valuations.

Now, interest rates have risen, and many investors are no longer so willing to part with their money – or they are simply investing it elsewhere.

Another reason for the struggling unicorns can be found in the AI boom. "This development left hundreds of pre-AI technology startups behind, many of which are struggling with inflated valuations and outdated technology. At the same time, they are still too unprofitable for the public market," explains Inc.com.

In other words: against the trendy AI companies, the startups can no longer compete. For example, OpenAI and Anthropic have long left them behind.

The Result: Potential Valuation Losses in the Trillions

Data from Pitchbook, referenced by both The Economist and Inc.com, makes it clear that half of the US unicorns have not received new funding in three years or more. "Startups that last raised capital in 2021 are, on average, worth 68 percent less. For those that last raised capital in 2022, the value has dropped by 52 percent," quantifies Inc.com.

According to The Economist, Pitchbook estimates "net valuation losses between $500 billion and $1 trillion, as older startups adjust their prices, desperately search for buyers, or go bankrupt."

Those unicorns that have not yet sunk but have passed their prime are currently truly walking the line between life and death. The coming years will show which of them can be revived and which will disappear from the scene for good.