Silicon Valley is the world’s most important technology hub and the birthplace of a whole mythology of creatures: the «centaurs» — startups valued at $100 million (roughly €87 million) — the «unicorns» at $1 billion ( €878 million), and the «decacorns» sitting at $10 billion ( €8.78 billion).
Now a new species has joined the taxonomy: the «zombie unicorn». These are companies that once crossed the billion-dollar threshold and are today at severe risk of being written down — drastically, and possibly permanently.
The phenomenon is keeping venture capitalists up at night.
The root cause, according to The Economist’s analysis, is the end of the zero-cost money era. For years, near-zero interest rates pushed investors into startups with limited revenues and murky business models. The return of higher rates has since cut off that flow, trapping hundreds of companies in a spiral of devaluations. Some analysts estimate the total value destruction could reach anywhere between $500 billion and $1 trillion.
«Zombie unicorns»: the numbers and the causes
A database maintained by Ilya Strembulaev — one of the world’s leading experts in venture capital and startup financing strategy — revealed that as of May 2026, roughly 332 out of 1,900 publicly listed unicorns had raised capital at a valuation equal to or below their historical peak.
212 of those had already fallen below the $1 billion mark, losing the coveted status entirely. And 383 companies have received no new funding in the past three years.
The hemorrhage shows no sign of stopping. According to PitchBook data, VC funds raised $223 billion globally in 2022, at the height of the boom. By 2025, that figure had collapsed to just $66 billion — a nearly 70% contraction in three years.
The biggest losers — and the difficulty of rescue
Concrete examples make the scale of the crisis visceral. Cameo, the personalized video platform, fell from a $1 billion valuation in 2021 to just $82 million today. SonderMind, a mental health specialist matching platform, dropped from $1.1 billion to $7 million.
The zombie unicorn list is only getting longer. A typical startup expects a 5- to 10-year growth runway before going public or getting acquired. Both exits are now nearly out of reach for the zombies: investors are routing new capital toward artificial intelligence startups rather than rescuing existing companies with aging business models and no clear path to profitability.
An unprecedented reckoning
Industry insiders warn that the ongoing write-down wave could reach close to $1 trillion. Starting next year, limited partners will demand concrete returns — and companies already in distress will be forced to restructure, find new buyers, or simply shut down.
The collapsing valuations are also becoming a serious problem for the funds themselves. According to World Economic Forum data, more recent VC vintages are delivering significantly lower returns to their investors than older cohorts did. And those that missed the handful of winning AI bets have seen particularly poor performance.
The real risk now is that profitability becomes concentrated in the hands of a very few operators. For everyone else in the ecosystem, the music has stopped — and the chairs are running out.
Editor’s note
This article was originally published in Italian on money.it by Andrea Fabbri on July 02, 2026 as «La Silicon Valley è piena di “unicorni zombie”, secondo The Economist». It has been translated and adapted for an international audience by the Money.it International desk.
