Unicorn bubble

[1][2] Venture capitalists and academics are warning that given the lack of change in startup's overall profitability and future cash flows, the rise in valuations are unsustainable and unjustified.

[4][5][6] These higher burn rates leading to lower profitability will decrease investors' gains in the next 5 to 10 years.

The total valuation dropped from $1.3 trillion to $761 billion signifying a 41% decrease in value in the startup economy.

However, less investment and less interest in founding new companies will also hurt worldwide economic growth and innovation in the near future.

The underlying reason for the bubble lies in rapidly rising average valuations and funding activities, while most startups remain unprofitable.

However, it is possible to reduce risk for venture capital companies and mitigate factors contributing to the bubble by being less generous in deal sizes and using stricter measures when providing valuations.

In addition, reducing burn rates is key to startups' overall stability and ability to live up to expectations.