In the AI boom, startups are speedrunning unicorn status

• As we were working on the list this year's list of "future unicorns", startups kept dropping off.
• The hottest AI startups are raising new rounds every few months.
• Another reason more companies are breaking out quickly is that AI's accuracy continues to improve.

The AI gold rush has gotten so frenzied that startups are outgrowing the unicorn label in real time.

While we were reporting this year's list of future billion-dollar companies, some of them raised fresh funding and vaulted past the cutoff almost overnight.

Let me explain: Ever since 2023, we have worked with TRAC, a San Francisco-based early-stage venture firm, to identify 30 startups that its AI algorithm predicts will someday be unicorns.

There is always a lag between the time TRAC gives us the list and when we publish because we have to do our own reporting on the startups. In past years, that was not a problem, since startups typically raised new rounds of capital no more than once a year.

But these are not typical times, with the hottest AI startups raising new rounds every few months.

"Competition to invest in the 'hot' companies is as fierce as we've seen in decades," said Fred Campbell, TRAC's managing partner. "TRAC is seeing investor demand exceed round sizes by 10X, meaning for every $1 the company wants to raise, investors are offering $10."

As we were working on the list this year, startups kept dropping off because they raised new capital, putting them over TRAC's $250 million threshold for being a "future unicorn." So here are the startups that "graduated" for our rankings:

• Builder.io, which is developing a content management system platform for composable commerce, closed a new round late last year, valuing it at $1.85 billion, according to PitchBook.
• Profound, an AI-driven marketing platform, reached a $1 billion valuation last month after raising $96 million in Series C funding.
• Braintrust, an AI observability and evaluation startup, raised $80 million in Series B funding at an $800 million valuation last month.
• Novig, a peer-to-peer sports prediction platform, reached a $500 million valuation following a $75 million Series B funding round announced last month.

Another reason more companies are breaking out quickly is that TRAC's AI predictive accuracy continues to improve.

"It is easier today for our AI to identify future unicorns than ever before," said Campbell.

But it's also easier for everyone else to identify those unicorns. When TRAC first shared its list of "future unicorns" with us in 2023, using AI to identify startups was more of a novelty. Now it's much more commonplace, meaning more VCs are chasing the same companies.

"It is harder than ever to secure allocation in funding rounds of the fastest-growing future unicorns," Campbell said.

There is also the question of whether the term "unicorn" has lost its significance in an age when the hottest frontier lab startups are valued at $1 billion or more right out of the gate, long before ever releasing a product.

Unicorns are supposed to be rare, but there are now 1,694 of them, according to Crunchbase data.

For his part, Campbell still believes unicorns are a unique enough breed.

"With some 20,000 to 25,000 new tech companies funded globally, only about 200 will become unicorns," Campbell said. "These are still very rare companies that will garner the lion's share of the market value-creation."