You'll need more than one hand to count the number of billion dollar startups minted in Q2. The last quarter saw seven companies enter the category, according to the Venture Pulse report released Tuesday by research firm CB Insights and auditing firm KPMG.
Versus Q1, that's two more startups crossing the (somewhat arbitrary) valuation threshold and joining the club of so-called "unicorns," a term Cowboy Ventures founder Aileen Lee coined in 2013 for startups worth at least $1 billion.
The Venture Pulse report notes that the second quarter increase does not push 2016 anywhere near last year's rate of unicorn births. In 2015, 79 startups became unicorns, 24 of them reaching the valuation in the second quarter. The first half of this year has seen only 12.
And fewer unicorns is probably a good thing, when you consider the uncertain fate of companies already in the category.
"While some existing unicorns have held highly successful follow-up funding rounds, low valuations may cause others to lose or fail to attract financing in the quarters to come. This may create a new trend of 'uni-corpses' as some unicorns disappear," the report says.
For those that have reached (or far surpassed) "decacorn" valuations, or valuations of more than $10 billion, exiting starts to look tricky. As IPO-phobic as many startups may be, once a company gets to be the size of Uber or Airbnb, going public starts to look like the only viable exit strategy, according to the report.
Unicorn startup Twilio's recent IPO is for these companies a "light at the end of the tunnel," according to the report. The startup's shares opened at 60 percent above IPO price on the company's first day of trading.
"If Twilio continues to do well, it could help renew interest in IPOs heading into the latter half of the year," the report states. (Some analysts have said they expect a resurgence in 2017, after the presidential election.)
Depending on how you contextualize the rest of the data, there's even more to be hopeful about.
Overall, deal activity was down--global financings dropped six percent to 1,886 total in the last quarter. Moreover, the increase in funding seen in Q2 was largely attributable to megarounds for mega-valuation startups. Of the $17.1 billion invested in VC-backed startups in North America (of $27.4 billion globally), $4.5 billion went to Uber and Snapchat, valued at $62.5 billion and $22 billion respectively.
That concentration of funding in rounds for just two enormous startups against a backdrop of a decline in the overall number of deals seems to indicate relatively grim times. The silver lining for the Pollyannas out there and those with longer memory is that if you zoom out from a quarterly to annual perspective, things don't look as dire as they do in the micro view.
"Yes, it's certainly true that we've seen a sharp pullback in both deal and dollar terms in recent quarters, especially when comparing against the aggressive financing we were seeing in Q2 and Q3 2015," says CB Insights Kerry Wu in an email. "However, if we frame this from a multi-year perspective, we're still at a relatively high level of deal and funding activity, so the sky is not necessarily falling although the forecast is uncertain."