Tech 'unicorns' face tougher road for funds

Those billion-dollar tech startups known as "unicorns," which feasted on record capital inflows for much of last year, are facing tougher challenges for funding, a survey showed Tuesday.

Venture-backed startups globally saw a 30 percent drop in funding in the fourth quarter to $27.2 billion, according to the survey by KPMG and research firm CB Insights.

The number of funding rounds fell 13 percent from the previous quarter to 1,742.

Some of the exuberance has worn off after the feverish pace of funding in the first nine months of 2015, according to the report.

"Although it ended with a bit of a whimper, 2015 was a gargantuan year for venture capital-backed companies. In aggregate, they raised the most money since 2000," said Anand Sanwal, chief executive of CB Insights.

For the year, the report found $128 billion in venture funding for startups, up 44 percent from 2014. The number of funding rounds was more than 7,800.

Yet the latter part of the year saw some signs of cooling, with less funding and writedowns in the value of some hot startups, the researchers noted.

Unicorns a moniker designed to highlight the relatively rare occurrence of billion-dollar startups have been growing as companies found private equity funding without using the conventional path of a stock market initial public offering (IPO).

But some venture capital investors have been warning about a bubble in private funding values, and these fears have been borne out to a degree in late 2015.

"A number of IPOs fell short of recent private valuations, no doubt rattling VC investor confidence," the report said.

"In the US, several mutual funds marked down a number of startup valuations related to 'unicorn' companies  no doubt prompting more scrutiny of additional VC investment activities."

Mobile payments startup Square made its stock market debut in November, raising $243 million at a market value of $3 billion  or roughly half the level from its latest private funding round.

Several other startups such as the social network Snapchat and benefits administrator Zenefits have seen their valuations slashed, although the biggest unicorns such as Uber and Airbnb have seen their values continue to rise.

The latest trends have fueled fears of "wounded unicorns" and lower valuations, which could spill over to publicly traded tech firms.