Aug 28, 2017 ยท 4 minutes

Two and a half years ago, Fortune published a cover story, “The Age of Unicorns.”

This was something of a noble statement, because even then we were well past peak unicorn, and yet the beast needed to be trapped inside the stapled mundanity a magazine cover to be tamed. The Silicon Valley unicorn had gone from clever buzzword to very real trend to something wild that felt just a little bit out of control. Or as Fortune explained it...

Today the technology industry is crowded with billion-dollar startups. When Cowboy Ventures founder Aileen Lee coined the term unicorn as a label for such corporate creatures in a November 2013 TechCrunch blog post, just 39 of the past decade’s VC-backed U.S. software startups had topped the $1 billion valuation mark. Now, casting a wider net, Fortune counts more than 80 startups that have been valued at $1 billion or more by venture capitalists.

Even as Fortune counted the unicorns, it expressed a sense of queasiness at the very concept. “The rise of the unicorn has occurred rapidly and without much warning,” the story said. "All of this has begun to feel bubblicious, especially to those who lived through the last cycle.”

If history doesn't repeat, it rhymes. Only in the case of the unicorns, the rhymes are being written by a bad poet. The unicorns of yore -- and by yore I mean two years ago -- aren't flaming out like the Webvans of the dot-com bust. There are no hard lessons being inscribed inside the mythology of failed startups. No, there is just the sad, slow deflation of a blow-up swimming pool that some kid punctured when he played too hard.

Take Uber, the one-time alpha of the unicorn pack. Not long ago, it attained a $70 billion valuation. Then Uber rammed its horn into a thicket of problems: a chain of sexual-harassment scandals, the departure of its CEO (while going without a CFO or COO), a boardroom battle that repels potential CEOs, and a string of potentially costly lawsuits. Uber's valuation, by the measure of one potential investor, Softbank, may have sunk to $40 billion and could even have fallen lower.

One might deduce from this that Uber should have gone public already. That is, what if Uber had an IPO a year ago, with a $70 billion valuation that more investors believed in? Would things be any different? The experience of Snap, Blue Apron and other IPOs of 2017 suggest not.

We won't recap the travails of those recent IPOs, which are well known. But it's worth making a few points. First, as dire as the IPO market seems, the M&A market for unicorns is worse. On Friday, Pitchbook released its 2017 Unicorn Report, which suggested traditional exits are shuttering for private tech companies once valued above $1 billion

So far this year, by Pitchbook's count, five unicorns have gone public, above the four in all of 2016. By contrast, two unicorns have been acquired so far this year, down from the five in all of 2016. As Pitchbook explained it,

For unicorns, the most common path to exit is through an IPO, in a marked difference from the rest of the venture industry. While it’s easier for these companies to afford the rising cost of going public, in many cases there isn’t much choice. As valuations grow larger, fewer corporations have the ability or desire to make a purchase of that size, diverting resources away from other corporate initiatives. We haven’t, however, seen a rush to go public from unicorns, despite markets trading at all-time highs.

And for unicorns who have made it public, the story isn't much better. Some of 2017's tech IPOs, like Cloudera and Redfin, are still trading above offering prices. Yet all major tech IPOs – Cloudera, Redfin, Tintri, Snap, Blue Apron – follow the now-familiar pattern of peaking in the first month (if not the first week) after their IPO and then drifting down in value.

And many of these recently public companies just can't win. Blue Apron files to go public, lowers its offering price and is still down nearly half of that IPO price after only two months. Now Jana Partners, an activist investor that took on Whole Foods before Amazon bought it, owns 2% of the company. (Blue Apron rose 5% on that news.)

Snap, by contrast, took a different route. Its founders made sure that investors buying shares in or after the IPO would have no voting rights, a wall against activist investors. But Snap shares, down 13 percent from its offering price and less than half its peak post-IPO price, is banned from the S&P 500 Index, which will affect liquidity in and demand for its shares.

In short, an IPO remains a dreadful prospect, perhaps more dreadful than ever. Yet as bad as IPOs have been this year, the prospect of being bought at a decent valuation is even worse. Where do startup founders, and early-round VCs turn for an exit?

There will be some effort to find an overarching reason for this conundrum. Blame the stupid IPO rules that want to keep small investors from being misled. Blame the tech giants who have been burned by bad M&A deals. And still, the overarching truth is, each unicorn has its unique, usually self-inflected problems. Each overfunded unicorn is driven by some financial death instinct, prompting it to shave off its glorious, if not-so-special horn.

Except maybe you, Airbnb. Are you going to stay private forever, financing your endless growth through cash flows? Cool. Because if you ever decide to go public, there is a herd of otherwise self-destructive unicorns roaming out there, looking for a new alpha leader.