Are unicorn start-ups on the verge of extinction?

2015 will be remembered as the year the technology start-up bubble began to deflate, and hype surrendered to tough realities. While we are going to see a decline in unwarranted buzz on outlandish valuations, the better companies, and superior technologies will endure relatively unscathed from the market correction that has already kicked off. 

In an industry where signalling is all important, the rise of technology start-ups has hit an undeniable correction. In the final quarter of 2015, three of Silicon Valley's unicorns suffered "down rounds". Unicorns are privately held companies valued at over $1 billion.

Square, one of venture capitals' most favoured unicorns went public this November, raising $243 million, at a valuation of around $3 billion. That's roughly half of Square's previous valuation of $6 billion at its last capital raise, while still a private company. It's a fascinating barometer demonstrating that increasingly investors in the public markets no longer have the appetite for overpriced tech stock. And where the public markets go, the private will follow. 

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In addition, mutual funds Fidelity and Blackrock have marked down their own stock in other prominent unicorns, Snapchat and Dropbox. The issue being that these companies were unable to demonstrate revenue in line with their previous valuations. Today there are 144 unicorns valued at $505 billion total, and companies like Atlassian stand out as one of the few profitable success stories of 2015.  

For a sector usually accustomed to frothy excitement and giddy press, 2015 is the turning point, with a new reality setting in for start-ups. The days of easy money are on the wane, with a greater emphasis on revenue rather than just sheer user numbers.

Given how addicted we all are to our phones and technology, the strongest players will undoubtedly continue, but we will see a marked separation and the demise of many ill prepared ventures - and it will be for the best.

Along with the retreat of over inflated valuations, we should start to see growth in tech ventures with triple bottom lines (social, environmental, financial good) at their business core. Check out Tia Kansara speaking about "Replenish", her movement championing companies that create positive outcomes for the planet.

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Afterall, in the future, when the likes of Twitter and Snapchat have become superseded technologies, what will hopefully prevail is backing for companies with a strong social and environmental purpose and a renewal of values that support us as one humanity. 2016 may be the year to usher in purpose driven start-ups.

This is a guest blog and may not represent the views of Virgin.com. Please see virgin.com/terms for more details. Thumbnail from gettyimages.

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