Small Impact of Lockdowns on Startup Unicorn Profits: Only 7 of 69 Are Profitable in 2020, Up From 6 in 2019

jeffrey lee funk
6 min readDec 15, 2020


Small Impact of Lockdowns on Startup Unicorn Profits:

Only 7 of 69 Are Profitable in 2020, Up From 6 in 2019

Seven of 70 Unicorn Startups were profitable in the first three quarters of 2020 and only three of them were profitable in 2019 (See figure). Zoom, Etsy, and Green Sky were profitable in both 2019 and 2020 with profits for both Zoom and Etsy increasing in 2020. Oportun, Square, Sunrun, two fintech and one solar installer went from profitable in 2019 to unprofitable in 2020. Three e-commerce startups, Peloton, Wayfair and Purple Innovation, and one cloud storage startup, Dropbox, went from unprofitable in 2019 to profitable in 2020. The lack of change in the number of profitable Unicorn startups occurred despite the rise in revenues in 2020 for most Unicorns because the lockdowns increased demand for cloud-based business and entertainment services.

The continuation of poor profits provides more evidence that most unprofitable Unicorns will not become profitable. After all, if they cannot make money in a pandemic when many of their services have become much more important and widely used, how can they turn a profit once things return to “normal,” particularly since they couldn’t achieve profits during normal times even after 10 years of operations. Looking forward, as businesses open back up, demand for cloud-based services will likely fall and thus revenues and profits will fall. This also suggests that privately held Unicorns, ones that have yet to do IPOs, are mostly unprofitable and thus the record low profitability of startups doing IPOs is likely to get worse. With a global valuation of $1.9 trillion for privately held Unicorns, startups valued at $1 billion or more, there will likely be many revaluations over the next few years, perhaps reducing the value of these Unicorns and the ones already doing IPOs by 70 to 90%.

Table 1 summarizes net income and the ratio of net income to revenues for Unicorns in the first three quarters of 2020 and for all of 2019. Unicorns are privately held startups that are valued at more than $1.0 billion, so technically most of the startups shown in Table 1 are ex-Unicorns. However, to simplify the discussion, this article uses the term “Unicorns” for startups who have either done or not done IPOs.

Table 1. Net Income ($Millions) in 2020 for Unicorns that Released Data

Table 1 shows that only seven of them, or 10% of the 70 Unicorn startups, had profits in 2020 despite 49 of them being founded in or before 2010, or 10 years before the year 2020. The 10% (7 of 70) figure for profitability is smaller than the 20% of startups profitable at IPO time over the last few years, which was much smaller than the 80% for startups founded in the 1980s, according to Jay Ritter’s data[1]. Thus, not only has profitability dramatically dropped over the last 40 years among startups doing IPOs, today’s most valuable startups, those valued at $1 Billion or more before their IPOs, are less profitable than startups that did not achieved $1 Billion in valuations before their IPOs.

Twenty of the 70 saw their ratio of income to revenues rise by 0.10 or more while nine saw their ratio fall by 0.10 or more. The greater number of increasing than decreasing ratios s is a good sign. However, of those that saw their ratios rise, 19 of 21 began with ratios of minus 0.30 or worse. Of those that saw their ratios fall, six of the eight also began with ratios of minus 0.30 or worse. It seems that big money-losing startups also experience large amounts of volatility and thus the greater number of rising than falling ratios may have more to do with volatility than real improvement, particularly after the lockdowns are ended.

Among startups with ratios better than -0.30 in 2019, both Zoom and Peloton saw their ratios rise about 0.15 while Zscaler and GoPro saw their ratios fall by about 0.20. Zoom and Peloton both benefited greatly from the lockdown with demand for Zoom’s video services and Peloton’s exercise bikes strongly rising.

The most successful startups of the past half century, documented in the first article of this series[2] of now 23 articles, also provide evidence that the percentage of profitable startups are low, and their losses are high. Thirteen of 23 had profits by year five and another 9 had profits by year 10. Only one took longer than 10 years and both Amazon and Qualcomm took 10 years, while Uber was unprofitable at year 10. Uber’s cumulative losses are six times[3] bigger than those of Amazon at its peak losses[4] and its losses continue to grow.

It is not just Uber that has high losses among the Unicorns; Figure 1 shows that many other Unicorns also have high losses. Sixteen of 70 had losses greater than 50% of revenues and another 12 (including Uber, Lyft, Pinterest, Slack, Palantir, and Snapchat) had losses greater than 30% (not counting liquidations). Clearly the chances that these startups will ever achieve profitability are very low, and even they do, they have billions in cumulative losses that must be covered through future profits.

Will these startup Unicorns become profitable? Proponents of startups, including venture capitalists, entrepreneurs, and business school entrepreneurship programs, claim this will happen, but they do not provide any evidence for their optimism. It is more likely that their optimism comes from the fact that their livelihoods depend on startups becoming profitable, so that they can continue to sell their educational services for a high price. But logically speaking, if startups are unable to be profitable at year 10, why would they become profitable at year 15 or 20? Furthermore, a previous Medium article found little correlation between founding year and the ratio of losses to revenues.

What about the privately-held Unicorns? Are they profitable and will they be acquired or do successful IPOs? Of the Unicorns shown in Table 1, 23 have released net income figures since March 2020 and only two of them had profits in 2020 and none in 2019, thus suggesting that the most profitable ones have done IPOs and that few of the remaining privately held Unicorns are profitable[5]. Data on foreign Unicorns are similar (See my previous Medium articles[6] and the number of unprofitable startups may continue to rise because of so-called blank-check companies that make it easier for startups with not just losses, but with little or no revenues to go public, none of which are Unicorns[7].

In summary, only 7 of 70 Unicorns had profits in 2020 up from 6 of 73 in 2019. Furthermore, most of the profitable Unicorns did IPOs many years ago. This suggests that privately-held Unicorns, ones that have yet to do IPOs, are likely unprofitable. As of June 2020, the global value of these privately-held Unicorns had reached $1.9 trillion, a huge figure[8]. The majority of these Unicorns were either Chinese (227) or American ones (233), suggesting these two countries will be the biggest lowers when the Unicorn bubble bursts.