There's something rotten at the heart of the unicorn economy.

These companies, by definition, aren't priced by markets in the traditional sense. They're worth what someone is willing to pay for a share of an uncertain future. And the more this valuation becomes an end in itself, the less it reflects the fundamentals of actual value creation.

The unicorn, in many cases, has stopped being a metaphor for rare excellence. It's become a mascot for capital misallocation.

Fundraising as Product

In a normal business, you build a produ ct that people want, sell it at a profit, and scale as demand grows. In unicornland, you build a product that gets funding, signal traction, use that signal to raise more money, and defer monetization indefinitely. This works so long as the next round is larger than the last. Until the wheels come off.

This isn't a new critique. But the dynamic persists, and worsens, because fundraising has become its own kind of product. Something polished, pitched, iterated, and optimized. Founders treat pitch decks like GTM strategies. VCs look at social proof before spreadsheets. Everyone is trying to time the next round.

The irony is that a business can become better at raising money than making it. And nobody quite knows how (or even whether) to penalize this.

The most spectacular crashes in business history follow the same pattern: belief in paper value over real output. The South Sea Bubble in 1720 promised profits from trade routes that didn’t exist (more on that later this week.) The dot-com bust was littered with companies worth billions that had no revenue. Pets dot com. Webvan. eToys. The logos outlived the ledgers.

Valuation is, in theory, a proxy for expected future cash flows. But it is also social psychology. It’s mimetic desire with a term sheet. And that desire is often uncorrelated with utility or long-term sustainability. Tulips. Railroad bonds. Mortgage-backed securities. Unicorns.

The Cult of the Burn Rate

In pursuit of unicorn status, startups adopt a cost structure built for speed, not durability. You hire quickly. Spend aggressively. Subsidize users. Go after market share like it’s a zero-sum war. “Growth at all costs” is moral framework in which frugality is interpreted as an immoral lack of ambition.

This burns through capital, but more critically, it burns through optionality. The company that might have been profitable at $10M ARR becomes unviable at $100M in spend. Suddenly, break-even is 5 years away. And the only way out is up.

Up to the next round. Up to the next valuation. Up to an exit that lets everyone forget the P&L ever existed.

Who Actually Profits from a Unicorn?

Consider who benefits from a startup hitting a billion-dollar valuation:

• Early-stage VCs who mark up their investment and raise the next fund.

• Growth-stage investors who get preferred shares with liquidation preference.

• Founders with paper wealth and brand equity that can be monetized even if the company fails.

Now consider who doesn’t:

• Customers, who may be subsidized into dependency on an increasingly decaying or bloated product.

• Employees, who get diluted or laid off when the music stops.

• The public, who inherits the externalities of artificial growth: monopolistic behavior, distorted labor markets, inflated valuations.

This isn't to say no good comes from the unicorn economy. Some unicorns are real. Stripe, Figma, Canva, SpaceX - they create value beyond hype. But they are the exceptions. Most unicorns are not outliers of success. They are artefacts of a system that confuses signal with substance.

Once you’re a unicorn, you have to act like one. That means behaving like a public company without being held to public company standards. You announce bold expansions. You hire C-suite executives before finding product-market fit. You expand into adjacent markets before locking in the core. You partner with celebrities. You sponsor conferences. You build brand faster than moat.

And all of it becomes very difficult to walk back. Because once a valuation is anchored, lowering it is seen as failure. Even when it’s just honesty.

Quiet Giants

Some of the most durable, profitable, and societally useful businesses never raised a dollar. They are built quietly, operated profitably, and scaled sustainably. They are often dismissed as "lifestyle businesses" by investors. But they have something unicorns don’t: optionality, ownership, and time.

Basecamp. Mailchimp. Atlassian. These companies created massive value before ever taking outside money - or without taking it at all. They optimized for user experience over user growth. For revenue per employee over headcount. For profitability over prestige.

They were never trying to be unicorns. They were trying to be businesses.

When Valuation Becomes Fiction

The entire startup stack depends on a kind of fiction: that current valuation reflects future dominance. But once this fiction becomes the operating principle, founders take on growth they can't support. Customers receive service levels that can't be sustained. Employees work towards stock options that may never materialize. Competitors are priced out of markets by venture-subsidized rivals. And the company, now trapped in the inertia of its own narrative, can’t pivot, slow down, or reset expectations without inviting collapse.

Valuation, in these cases, becomes a kind of mutual hallucination. A shared lie told with enough conviction to secure the next round.

The Inverse Signal

Here’s the paradox: the closer a company gets to unicorn status, the less likely it is that it has product-market fit in the classical sense. Because real fit doesn’t always require outside capital. Often it throws off enough revenue to finance its own growth.

It’s worth asking: if a company needs hundreds of millions in funding just to survive, what is it actually building? And for whom?

There’s a reason Warren Buffett avoids early-stage tech. It’s not because he can’t understand it, it’s because the incentives are often too distorted. Value investing starts from what something is worth, not what someone might pay for it next.

This doesn’t mean growth is bad. It means we need to separate healthy growth from pathological inflation. Healthy growth emerges from demand, product quality, and repeatable sales. Pathological growth is driven by press releases, blitzscaling, and the fear of missing out.

VCs are beginning to admit this, at least privately. The recent correction in tech markets has exposed just how much of the unicorn economy was built on vapor. Down rounds. Layoffs. Fire sales. Soft landings that aren’t soft at all.

The companies that survive won’t be the flashiest. They’ll be the ones with customers who would miss them if they disappeared.

Unicorns as Red Flags

The unicorn label was meant to celebrate rarity. Today, it's printed like a commodity. Over a thousand private companies have reached the threshold. But more of them than you’d think would trade all those zeros for a sustainable revenue line.

Maybe the presence of a billion-dollar valuation should invite more skepticism, not less. Maybe it's not a sign of triumph but a warning signal. A company that had to grow unnaturally fast. That may have burned through too much capital to build defensible margins. That might be more hostage to investor expectations than customer needs.

The best companies of the next decade won’t be unicorns at all. They’ll be cockroaches: scrappy, durable, quietly profitable. The kinds of businesses that survive nuclear winters.

Because value isn't what someone is willing to pay.

It’s what someone’s willing to keep paying for a long time.