Someone has finally called it — if we’re in a bubble, watch for it to burst in the second half of this year.
That’s according to recent predictions made by CB Insights, an oft-cited Silicon Valley data source. The company analyzed data on “unicorn” funding rounds to determine when most will need to raise more money.
“If the second half of 2016 sees unicorns running into a financing wall, that will be the surest sign that the good times are, in fact, over,” the researchers wrote.
More than 60 percent of “unicorns” — private companies valued at more than $1 billion — likely will need to raise more capital in the next three quarters. Nearly four in 10 unicorns will need more funds in the final two quarters of this year.
That prediction is based on a median time of about one year between financing rounds.
CB Insights says this could create a traffic jam in the second half of 2016, as these companies fight for available financing — whether from private markets, an IPO, or an acquisition. But VC funding reportedly is slowing as investors become more discerning and more skeptical of possibly inflated unicorn valuations. The acquisition market is slowing as well, CB Insights reports, “and many of these unicorns have priced themselves so high that a logical buyer doesn’t really exist.”
Unicorns could stave off the bursting bubble by cutting costs — which would mean more layoffs.
Recent layoffs at companies like Optimizely, and the demise of others, including SpoonRocket on Tuesday, are already being felt across the industry. Applicants for jobs at tech startups are becoming more choosy, according to The Wall Street Journal, asking questions about the company’s spending, revenue and ability to weather a downturn. Promises of huge equity awards and even perks like free meals are less enticing as applicants worry about boarding a sinking ship.
Photo: This Wednesday, Feb. 24, 2016 photo provided by the California Highway Patrol shows a horse with a fake unicorn horn in rural Madera Ranchos in Madera, Calif., after it got away from its handlers. (Officer Justin Perry/CHP Madera via AP)