When Aileen Lee published “Welcome to the Unicorn Club” – the article that coined the word unicorn for a $1b startup – the average public SaaS company commanded a market cap of $1.5b.
I remember thinking a $1b M&A or IPO was so rare an investor might hope to achieve it once or twice in a career. Fewer than 15 SaaS companies traded on public exchanges then. With at least 20 firms and several partners per firm chasing unicorns, upstarts faced stiff odds.
From 2007 to 2016, $1.5b marked the upside case for most VC software and infrastructure investment memos.
2015 Return Multiple by Round

Round
Post, $m
Return Multiple at $1.5b

Seed
8.7
172x

Series A
28.4
53x

Series B
74.8
20x

Series C
139
11x

Series D
269
5.6x

If you were to read a memo from that era, you might have seen a table resembling the one above. It shows the potential return multiple from Seed to Series D at the median post-money of the era spanning 172x to 5.6x depending on the round.

Within five years, the median public SaaS market cap exploded from $1.5b to $9.8b in 2021. The return potential 10xed. The largest startups kissed $100b in market cap and higher.
Return projections skyrocketed. Competition fueled a surge in valuations.
Then the stock market’s fall reversed the effect. Mean market cap halved to about $4.5b.
2022 Return Multiple by Round

Round
Post, $m
Return Multiple at $4.5b
RM at $1.5b (2015)

Seed
35.2
128x
172x

Series A
101
45x
53x

Series B
352
12.8x
20x

Series C
857
5.3x
11x

Series D
2,226
1.9x
5.6x

Re-running the multiples math for today, return projections for the typical growth round collapsed. Series Cs dropped from 11x to 5.3x. Series Ds cratered from 5.6x to 1.9x by 66% – which is inline with the public market drop.
The more market caps on unicorns compress, the greater the downward pressure on rainbow foals’ valuations.
The silver lining: the median public software company in 2022 is three times as valuable as in 2015, which suggests valuations should settle higher than that era.
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