There are more than 50,000 venture-backed startups in the U.S., and only the tiniest fraction of them will ever reach a billion-dollar valuation. For the ninth year in a row, Forbes has teamed up with TrueBridge Capital Partners to search for the 25 most likely to pass that mark.
It’s been an especially tough year with banking troubles, layoffs, skittish investors and compressed valuations. But dig a little deeper, and smart founders are using artificial intelligence, software and data, data, data to build strong (and, we think, lasting) companies. The average revenue of the companies on this year’s list is $24 million, same as for last year’s list and double that of 2021, when the markets were bubblier. Average equity funding raised: $104 million versus last year’s $139 million, meaning this year’s crop are building their companies with a little less cash.
Less cash, after all, is available these days. All venture-backed startups raised just $33 billion in the first half of this year, versus a total of $167 billion last year, according to data from the latest PitchBook-NVCA venture monitor.
Andrew Lau, cofounder and CEO of Jellyfish, which developed software to help engineering teams and made the cut for this year’s list, figures that the tighter market actually gives his company an edge. “As the world moves to efficiency, we understand where people are stuck, where they need help and where scarce resources can be better allocated,” he says. But he’s also glad that he stockpiled cash with a $71 million fundraise a year-and-a-half ago. “All three of us [cofounders] are grumpy, old entrepreneurs,” he says. “We’ve lived through enough cycles.”
Helped by TrueBridge’s outreach to venture-capital firms and Forbes’ own reporting, we received more than 200 nominations. To put together the list, TrueBridge first ran a quantitative analysis based on metrics that include revenue, revenue growth, valuation, valuation growth, headcount and more. Forbes reporters then interviewed founders.
Our featured story this year is on Monarch Tractor, which is building autonomous electric tractors. They brought in $22 million in revenue last year, and expect to at least triple that number this year. We also profiled Pendulum Therapeutics, a rapidly growing probiotics maker whose flagship product is designed to help diabetics keep their blood sugar levels under control.
Other firms on the list have found rapidly growing businesses by doing the most mundane of tasks. Loop Returns helps small retailers squeeze more money out of returns by nudging customers towards exchanges rather than refunds, while Medallion helps hospitals and health startups deal with burdensome administrative tasks like verifying the credentials of doctors and nurses. And Harvey, founded just one year ago, uses AI to help lawyers deal with regulatory filings, first drafts and other legal scutwork.
We’re pleased that this year’s list includes six companies with female cofounders, including three who are also CEOs: Bobbie’s Laura Modi, GlossGenius’s Danielle Cohen-Shohet and Pendulum’s Colleen Cutcliffe. While we’d like to see even more, that’s up from last year, when only one company, insurance startup Insurify, was both cofounded and led by a woman.
More than half of this year’s companies have Asian or Hispanic founders, but we’re missing Black founders this time. This list reflects the world as it is, not how we’d like it to be, and Silicon Valley still gives women and Black founders less. Black-founded startups have struggled to gain more than about 1% of venture funding, and their share of the market dropped disproportionately last year as overall funding declined, according to Crunchbase. We hope for better next year.
As for our long-term track record, it’s strong. Of the total 200 alumni of this list since 2015, 120 have become unicorns, including Figma, Anduril, Benchling, Duolingo and Rippling. Another 27 were acquired, while three went public for less than $1 billion. Only five imploded or shut down.
But with markets tighter and investors more discerning, at least 21 of our alumni that previously surpassed $1 billion are now worth less than that. A few are worth much less. This includes meal-delivery startup Blue Apron, which soared past $1 billion soon after its appearance on the 2015 list and is now publicly traded with a recent market cap of just $42 million.
For alumni now thinking about going public, SPAC deals are out and focusing on operations is in. “This is a very tough fundraising environment, and a very tough IPO market,” says Charles Baron, cofounder of Farmers Business Network, an alum of the 2018 list that reached a $3.9 billion valuation in 2021 with funding from Fidelity. “For companies like us with hundreds of millions in revenue, we have to focus on sustainable revenue and profitability for the long term, so that’s the mode we’re in right now.”
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