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the concept of "unicorn" was coined by american venture capitalist aileen lee in 2013 to describe technology startups with a valuation of more than $1 billion that were not listed on the stock market. at that time, companies with such high valuations were rare (only 39), such asalibaba, twitter, uber, airbnb, etc. - since then, the entrepreneurial boom has intensified, and the extremely loose monetary environment has helped venture capital firms raise cheap funds to pour into start-ups at an unprecedented rate.

the development and popularization of the internet and smartphones have provided digital infrastructure for the prosperity of venture-backed e-commerce and social media companies. with huge network effects and low marginal costs, the number and valuation of global unicorns and the size of the global venture capital market have continued to rise.

since unicorns are a folk concept, there is no clear definition or unified standard for unicorns among various institutions in the market at home and abroad. at the same time, compared with the secondary market, the information transparency of the primary market is lower, resulting in differences in the screening and inclusion standards of unicorns among the mainstream venture capital data platforms at home and abroad in the statistics of unicorns. the statistical data are also different, but the overall trend of data changes is similar.

the "2024 global unicorn list" released by hurun research institute shows that as of the end of 2023, china has a total of 340 unicorn companies, still ranking second in the world, but compared with the rapid growth in previous years, it has shown a slowing trend.

from a global perspective, the scale of global primary market investment and financing will peak in 2021.

2022 is the most active three years in the history of unicorns, with an average of one unicorn born every two days. starting from the second half of 2022, the domestic and foreign equity investment markets gradually entered a stage of adjustment and development, with fundraising and investment scales showing varying degrees of downward trends. the financing environment on which unicorns rely for growth has deteriorated, the valuation bubble has burst, and the number of new unicorns has dropped sharply, with many unicorns even facing a survival crisis. in 2023, the growth in the number of unicorns and valuation scale hit a new low in recent years (figure 1), and the number of new unicorns in the world and china has decreased significantly (figure 2).

as a high-risk, high-return investment target, the reason behind the slowdown in the growth of unicorns is that investors are more cautious. according to statistics from crunchbase, a foreign venture capital data platform, the funds flowing into unicorn companies have dropped significantly compared with the previous two years (figure 3), making the previous high-speed growth of unicorns unsustainable.

the investment and financing scale of china's vc/pe market in the past two years has been at a relatively low level in the past decade (figure 4). this situation is caused by a variety of reasons - global economic uncertainty, the decline in economic growth at home and abroad, the increase in capital costs caused by the fed's interest rate hike, geopolitical risks, sino-us economic and trade frictions and sino-us technology wars, and the strengthening of domestic supervision of emerging industries and financial industries, which have jointly promoted the bursting of the valuation bubble of start-up companies.

the concepts of entrepreneurship and investment have also begun to return to soberness and rationality, no longer blindly pursuing growth and expansion, but paying more attention to the long-term value and profitability of enterprises. chinese technology giants that were previously keen on investing in start-ups have also begun to control their scale in recent years.

china's unicorn ecosystem is experiencing the end of the previous round of investment cycle and the beginning of a new round of investment cycle. "industry support policies + government guidance funds/industry investment funds + state-owned investment institutions + track industries" have become a major development and evolution trend of china's unicorn ecosystem.

according to statistics from zero2ipo research, the proportion of investment by state-owned institutions in china's equity investment market has increased from 10% in 2019 to 22% in 2023. behind this trend is the structural change in the domestic primary market funding background - the proportion of state-owned investors has increased, the proportion of foreign capital has decreased, market-oriented lps have gradually disappeared, and us dollar vcs have withdrawn in large numbers. state-owned assets and industrial capital that support national strategies and industrial development have become the main investors of rmb funds. the type of primary market funds has shifted to being dominated by policy-oriented lps and industrial capital, and local guidance funds with a scale of tens of billions or hundreds of billions of yuan have been frequently established.

however, after the epidemic, the financial situation of local governments, which are the source of venture capital, is tight. coupled with the reduction in land sales revenue caused by the downturn in the real estate market, the scale of funds available for investment in emerging enterprises has further shrunk.

in terms of the scale of venture capital funds, since 2023, the domestic market has shown a downward trend in terms of fund raising amount, investment amount, number of investment events, and number of newly established investment institutions. a large number of investment institutions established in previous years are also experiencing a reshuffle, with the proportion of investment institutions with state-owned backgrounds gradually increasing, and their investment style is also more cautious. from the national to the local level, more and more policies are introduced to guide patient funds to enter the market.

funds with a government background tend to focus on "little giants" that are specialized and innovative in the key development directions of local industries: focusing on niche markets, having strong innovation capabilities, high market share, mastering key core technologies, and having excellent quality and efficiency; and developing projects locally that are in line with the country's key support industries and can set up headquarters, build factories, recruit workers, and pay taxes locally.

guided by policies, venture capital investing in strategic emerging industries no longer focuses entirely on valuation growth, but instead presents the significant characteristics of "investing early, investing in small companies, and investing in technology." the overall business transformation cycle of hard technology companies is longer and more difficult, which also leads to the fact that emerging unicorn companies mainly originate from business innovation driven by advanced hard technology, as well as industry digitization and intelligence enabled by soft technology.

compared with the previous concept of "mass entrepreneurship and innovation", today, the technological attributes and commercial realization capabilities of start-ups are more valued. the key investment tracks have shifted from concepts and tracks related to financial innovation, consumer internet, and sharing economy to strategic emerging industries with hard technology attributes such as semiconductors, new energy, and high-end manufacturing, and new quality productivity directions, focusing on technological innovation, solving "bottleneck" problems, meeting the needs of domestic substitution, and enabling the optimization and upgrading of the industrial structure of the real economy.

under the new round of industrial cycle, technological innovation has become the main theme of the domestic investment market. the electronic information industry has become increasingly popular (figure 5), and it is also far ahead of other industries in terms of the scale of book exit returns. among the various sub-segments, the semiconductor industry chain is the most active. since 2023, the top five popular industries with a large number of investment cases are semiconductors and electronic equipment, it, biotechnology/healthcare, machinery manufacturing, and clean technology/new energy.

in the hot spot, the popularity of generative ai has made artificial intelligence the hottest business innovation trend at present. the industry chain opportunities from infrastructure to commercial applications are driving the continuous birth of a new round of unicorns. in the first quarter of 2024, the total financing amount of aigc and ai industry applications has reached nearly 20 billion yuan, exceeding new energy and second only to integrated circuits, which have been the hottest in recent years (figure 6).

the change in the entrepreneurial trend has led to new demands for the development of the digital economy.mobile internetthe bonus period is gradually coming to an end, and the once popular platform economic logic of "telling a good business story + financing + spending money to exchange for users + listing overseas" is no longer valid.

the growth strategies of the new generation of unicorns now need to be more pragmatic and able to differentiate themselves from the competition. in the context of rising capital costs, the "capital as strategy" model that puts revenue growth above cash or profit creation is more difficult.

in the current environment, science and technology enterprises have been given a new mission - they need to empower the real economy more closely, and both soft and hard technologies must demonstrate substantial technological content. those "scholar-type" and "expert-type" entrepreneurs with a strong academic background and technical r&d experience have begun to be favored by both capital and the market.

unicorns face exit difficulties. on the other side of the market, many unicorns with inflated valuations have performed poorly after entering the secondary market (table 1), which has objectively hit the valuation bubble of unicorns. for chinese unicorns, a-share and us stock regulators have strengthened supervision of chinese companies' listings, ipo (initial public offering) thresholds have been raised, a-share and hong kong stock markets are sluggish, ipo exit scales have fallen sharply, and unicorn investors do not have good exit channels and exit returns, making financing more difficult.

judging from the number of newly added unicorns, china still ranks second in the world and is the main engine of global business innovation. china once led the world in the number of newly added unicorns, but was surpassed by the united states in 2019 (figure 7, figure 8).

the us capital market and venture capital industry are more mature and larger in scale. with global innovation centers such as silicon valley and the largest technology companies, the us has a better foundation for the development of the unicorn ecosystem. the us's previous loose monetary policy and the strong performance of the us stock market in recent years have attracted a large amount of venture capital and promoted the development of the us unicorn ecosystem. according to data from zero2ipo research, the size of china's equity investment market is only about one-tenth of the us market.

there are big differences in the industry distribution of chinese and american unicorns (figure 9). in the past few years, chinese unicorns accounted for a high proportion of platform sharing, concentrated in consumer internet. now, as consumer internet has become more mature, chinese unicorns are more likely to be distributed in artificial intelligence, advanced manufacturing, industrial internet, new energy, chip semiconductors and other fields, while american unicorns are more distributed in financial technology, network tools, software services, artificial intelligence, medical health and other soft service application levels.

the venture capital market in the united states is also declining. according to statistics from pitchbook, an investment and financing data platform, in 2023, even with large investments in artificial intelligence startups, the financing amount of us venture capital companies hit a six-year low, with investment falling 30% to us$170 billion, and the number of active venture investors in the united states falling 38%. at the same time, according to data from zero2ipo research, the scale of equity investment markets in both china and the united states has declined, but the decline in china is significantly greater.

in the global unicorn ecosystem, the number and overall valuation of chinese unicorns still rank second in the world, and there are also unicorns whose valuations are among the highest in the world (table 2).

in addition to the number of unicorns, we should pay more attention to the quality of unicorns and the risks behind the number. in recent years, there has been a huge amount of water in overseas unicorns, which has spawned a large number of unicorns that are not worthy of their names, lack actual demand, have flaws in their business models or even fraud, such as wework, which went bankrupt after listing, and ftx, a cryptocurrency unicorn that exploded. china has learned some lessons from the past in the supervision of business innovation and has done a better job in risk management.

although the number of chinese unicorns has declined, compared with the large number of unicorns that burned money for traffic in the previous mobile internet era, the hard technology content of chinese unicorns is increasing significantly. this trend shows that chinese unicorns are transforming from model innovation to technological innovation, and are paying more attention to long-term development and the construction of core competitiveness.

china's strong talent base of entrepreneurs and technicians remains an overwhelming advantage. the government has also provided strong support for strategic emerging industries, which can provide continuous development momentum for hard technology unicorns. this innovative ecosystem combining government and market has provided strong support for the rise of chinese unicorns.

the market downturn is also a period of precipitation for the breeding of excellent companies. entrepreneurs and investors should dig deep into the industry and hone their competitiveness. many unicorn companies are in a stage of high growth and high losses, and their profitability is not strong. in the crowded hot industry track, start-ups need to have enough resilience to face fierce market competition and high uncertainty in the external environment. only those unicorns that can continue to innovate, optimize business models, and improve profitability can stand out in the future competition.

looking ahead, the domestic substitution and overseas expansion capabilities of the new generation of unicorns will be given greater attention. in order to obtain overseas funds and explore new markets, many internationally competitive startups and unicorns will actively go overseas, which is expected to reshape the global unicorn ecosystem. in the process of pursuing internationalization, we need to pay more attention to the global emerging technology applications and business innovations.

at the same time, we must also guard against the risks of overcapacity and excessive hype in popular industries, and pay attention to the risk of inflated valuations of unicorn companies themselves. when advanced technology development is in its early stages, there is huge room for imagination, which can easily lead to overheated hype.

therefore, we need to pay more attention to the implementation capabilities and revenue capabilities of unicorn companies' business innovations with a long-term perspective - whether they have sufficiently high competitive barriers and a steadily growing market share, whether their actual performance can meet valuation expectations, and whether their business model is sustainable and viable.