A distinct cohort of former high-flyers is successfully navigating the challenging market transition. These companies are implementing tough but necessary changes to transform from growth-obsessed cash burners to sustainable businesses with paths to profitability and long-term success.

 

Their experiences offer valuable lessons not just for other struggling unicorns but for founders at any stage who want to build resilient companies. 

The Path to Profitability

For unicorns having to face reality, the shift in priority from growth to profitability can be jarring. This transition isn’t simply about cutting costs; it requires fundamental rethinking of business models, market approach, and operational philosophy.

The Margin Imperative

Companies that successfully navigate this transition start by ruthlessly examining unit economics and contribution margins. Rather than focusing exclusively on growth metrics, they adopt profitability targets that guide decision-making across the organization.

 

Consider Klarna, the Swedish buy-now-pay-later fintech. After reaching a peak valuation of $45.6 billion in 2021, the company saw its valuation slashed to $6.7 billion in a 2022 down round. Responding to this reset, Klarna implemented strict financial discipline, reducing headcount by 10% and refocusing on markets with clear paths to profitability.

Most notably, the company dramatically shifted its rhetoric and goals. CEO Sebastian Siemiatkowski began emphasizing operational efficiency over growth, telling CNBC in early 2023: “We’ve had to make some tough decisions, prioritizing profitability over volume.” By Q2 2023, the company reported its first quarterly profit since 2019.

The Pricing Reset

Many unicorns built their growth on artificially low pricing, assuming they could raise prices once they achieved scale. Those successfully pivoting to profitability are facing the pricing challenge head-on, implementing strategic increases despite the growth headwinds they create.

DoorDash exemplifies this approach. While still not consistently profitable, the company has systematically increased customer fees while expanding its higher-margin business lines. Its DashPass subscription program, which generates predictable revenue while creating customer lock-in, now accounts for over 10 million subscribers. Combined with operational efficiencies, these changes have dramatically improved unit economics without sacrificing the company’s market position.

 

The strategy typically involves several difficult decisions:

1. Ending free or heavily subsidized tiers: Many companies have eliminated zero-revenue customer relationships that were justified for “growth” but drained resources
2. Raising prices on enterprise customers: Companies with significant switching costs are prime targets for strategic price increases
3. Cutting experimental product lines: Focusing resources on proven revenue generators rather than speculative expansions
4. Reducing geographic footprints: Concentrating on core profitable regions while exiting challenging markets

The Retention Revolution

Companies that pivot successfully recognize that retaining existing customers is far more capital-efficient than acquiring new ones. This shift requires fundamental changes to organizational structure and incentives.

 

Calendly, which achieved unicorn status in 2021, exemplifies this approach. While the scheduling software company hasn’t faced the valuation challenges of some peers, it proactively adjusted its strategy to emphasize customer retention and expansion over pure acquisition.

The company refocused its product development on enterprise features that drive upsells within existing accounts and reorganized its sales team to prioritize account growth over new logos. This approach has enabled continued growth without the massive marketing expenditures that characterized many unicorns’ strategies.

The Consolidation Wave

As standalone paths become increasingly difficult, many unicorns are finding salvation through strategic combinations. These transactions rarely happen at peak valuations, but they provide a lifeline for companies that might otherwise face more dramatic devaluations or shutdowns.

The Strategic Merger

Rather than continuing to compete in overcrowded categories, some unicorns are choosing to join forces with complementary players. These mergers allow the combined entities to eliminate duplicate costs while creating stronger value propositions.

 

The transportation sector provides clear examples. Bird acquired Scoot, Lime acquired Jump from Uber, and various regional players combined forces. These mergers allowed the consolidation of user bases and infrastructure while eliminating duplicate overhead costs.

In enterprise software, we’re seeing similar patterns. As one example, customer data platforms Segment and Twilio combined in a $3.2 billion deal. Although this was below Segment’s highest private valuation expectations, it created a stronger combined offering with better economics than either company could have likely achieved independently.

The Tuck-In Acquisition

For unicorns with stronger balance sheets, acquiring smaller competitors provides another path to improved economics. By purchasing struggling companies at distressed valuations, they can acquire customers, technology, and talent at a fraction of the cost of building them from scratch.

 

Stripe, despite its own challenges, has continued selectively acquiring companies that extend its capabilities or market reach. Its acquisition of Recko (reconciliation software) and TaxJar (sales tax automation) exemplify this approach—adding high-value services that increase revenue per customer without proportionate increases in acquisition costs.

The Private Equity Safety Net

For some unicorns, private equity firms are providing an exit path that, although it doesn’t deliver venture-scale returns, prevents a complete collapse. These transactions typically involve significant restructuring but can preserve core business value.

 

WeWork, though an extreme example, illustrates this pattern. After its failed IPO and subsequent valuation collapse, the company eventually filed for bankruptcy protection and is undergoing significant restructuring. The result will likely be a much smaller but potentially profitable business that bears little resemblance to the hyper-growth vision that once justified a $47 billion valuation.

Right-Sizing Operations

The hallmark of unicorn survival in the current environment is the willingness to dramatically reset cost structures. This goes beyond typical efficiency measures to fundamental rethinking of operating models.

The Organizational Reset

Many surviving unicorns are implementing substantial workforce reductions, often coupled with organizational redesigns that flatten hierarchies and eliminate management layers.

Consider Stripe, which laid off 14% of its staff in 2022 despite remaining one of the most successful fintech companies. CEO Patrick Collison’s candid memo acknowledged their failure to adapt quickly enough to changing economic conditions: “We overhired for the world we’re in… and it’s on us to adapt.”

 

The most effective companies approach these reductions strategically rather than applying across-the-board cuts. They identify core functions critical to serving existing customers and generating revenue, while reducing investment in speculative expansion projects and overhead functions.

The Infrastructure Optimization

For unicorns with significant physical infrastructure—whether data centers, fulfillment facilities, or retail locations—optimization often provides substantial savings without directly affecting customer experience.

 

Instacart’s approach exemplifies this strategy. The grocery delivery company, which reached a $39 billion valuation in 2021, has systematically optimized its fulfillment operations by:

1. Consolidating delivery zones to increase density and efficiency
2. Implementing technology to optimize shopper routes within stores
3. Adjusting delivery pricing to reflect actual fulfillment costs
4. Creating partnerships with retailers for partially integrated operations

These changes have dramatically improved unit economics without sacrificing the core service promise, allowing the company to approach profitability despite market challenges.

The Technology Rationalization

Many unicorns built technology stacks designed for hypergrowth rather than efficiency. Those successfully pivoting are systematically rationalizing these environments to reduce complexity and cost.

 

This often involves painful trade-offs:

1. Simplifying product offerings: Eliminating features that create technical complexity without proportionate revenue
2. Consolidating technology platforms: Reducing the proliferation of tools and systems
3. Renegotiating vendor contracts: Leveraging reduced growth expectations to secure better terms
4. Shifting cloud strategies: Moving from purely elastic but expensive configurations to more cost-optimized approaches

While less visible than layoffs, these technology optimizations often deliver substantial savings while creating more sustainable foundations for future growth.

Case Study: Airbnb’s Turnaround

Airbnb provides one of the most instructive turnaround stories among major unicorns. When the pandemic hit in 2020, the company faced an existential crisis as global travel ground to a halt. Bookings dropped by over 70% almost overnight, and the company had just taken on $2 billion in emergency debt financing with onerous terms.

CEO Brian Chesky made tough decisions quickly, cutting 25% of staff and significantly reducing marketing expenditures. But beyond cost-cutting, Airbnb executed a strategic pivot that positioned it for post-pandemic success:

Refocusing on the Core

Airbnb shelved expansion plans into adjacent services like transportation and experiences, refocusing entirely on its core home-sharing business. This allowed the company to concentrate resources on the part of its business with proven unit economics and customer demand.

Identifying Emerging Patterns

Rather than simply waiting for traditional travel to resume, Airbnb identified emerging travel patterns that actually favored their model. As remote work became widespread, the company noticed increasing demand for longer stays—30 days or more—in locations outside major cities.

Airbnb rapidly adjusted its product and marketing to highlight these opportunities, creating new categories like “I can work from any home” that catered to these emerging behaviors.

Improving Unit Economics

The company used the crisis as an opportunity to improve its fundamental business model. It raised host fees slightly, streamlined its cleaning requirements, and optimized its search algorithms to prioritize listings with better economics for both hosts and the company.

The Result

Airbnb went public in December 2020, and while it faced valuation challenges initially, its disciplined approach to growth and profitability has enabled it to build a sustainable business that now trades above its IPO price—a rare achievement among recent tech IPOs.

By Q2 2022, the company reported its most profitable quarter ever, with over $2 billion in free cash flow, demonstrating that well-executed strategic pivots can transform even severely challenged businesses.

The Balance Sheet Imperative

Beyond operational changes, surviving unicorns are paying unprecedented attention to financial stability. This represents a significant shift from the growth-at-all-costs mentality that previously dominated.

Cash Conservation

Companies that successfully navigate this transition maintain maniacal focus on cash conservation, recognizing that runway equals optionality in uncertain environments.

This focus manifests in several ways:

1. Extended payment terms with vendors: Negotiating more favorable cash flow arrangements
2. Accelerated collections from customers: Reducing days sales outstanding through incentives and process improvements
3. Reduced capital expenditures: Shifting from ownership to rental or service models where possible
4. Facilities optimization: Reducing real estate footprints to match hybrid work models

The goal isn’t merely cost-cutting but optimizing the timing of cash flows to maximize operational flexibility.

Debt Restructuring

Many unicorns took on debt during the boom years, often with terms that seemed reasonable in a high-growth environment but became problematic as growth slowed. Successful pivots frequently involve debt restructuring to align obligations with new business realities.

Toast, the restaurant technology unicorn, exemplifies this approach. After pandemic lockdowns devastated its customer base, the company both raised emergency funding and renegotiated existing obligations, creating breathing room to execute its strategic pivot toward higher-margin financial services.

Strategic Financing

While the days of easy money are over, companies with credible paths to profitability can still access strategic financing. The key difference is that these rounds now typically involve investors who bring strategic value beyond capital.

 

Instacart’s 2022 financing exemplifies this approach. Rather than pursuing a purely financial round, the company brought in investors like PepsiCo that could help strengthen its core business through commercial partnerships. These strategic investors often accept more reasonable valuations in exchange for business synergies, creating win-win scenarios that purely financial investors might not.

The Leadership Challenge

Perhaps the most critical factor determining which unicorns successfully navigate this transition is leadership—specifically, whether founding teams can adapt from growth-oriented mindsets to operational discipline.

The Founding Team Evolution

Many unicorns were founded by visionary entrepreneurs with exceptional skills in product innovation, storytelling, and inspirational leadership. While these qualities remain valuable, the current environment demands different capabilities: operational excellence, financial discipline, and tough decision-making.

 

Some founding teams have successfully evolved their skillsets to meet these new challenges. Others have supplemented their capabilities by bringing in experienced operators with turnaround expertise, often as COOs or CFOs empowered to drive necessary changes.

The Board Dynamic

The relationship between founders and boards has also evolved significantly. During the boom, many investors took relatively passive roles, focusing primarily on helping companies accelerate growth and raise subsequent rounds at higher valuations.

 

In today’s environment, boards are taking more active roles in governance, challenging management assumptions, and pushing for faster pivots toward sustainable economics. This dynamic can create tension, particularly with founders accustomed to the growth-above-all environment, but when managed constructively, it often produces better outcomes.

The Communication Reset

Leaders successfully navigating this transition recognize the importance of transparent communication with all stakeholders. Rather than maintaining growth narratives that no longer match reality, they explicitly acknowledge changing circumstances and explain strategic shifts.

This transparency, while sometimes painful in the short term, builds credibility with employees, customers, and investors—creating space for the difficult changes required for long-term success.

Beyond Survival: Creating Sustainable Value

The most successful pivots aren’t merely about survival; they position companies to create sustainable value once market conditions improve. This forward-looking orientation separates true turnarounds from temporary cost-cutting exercises.

The Product Refocus

Companies that execute successful pivots use the opportunity to refocus product development on solving core customer problems, rather than chasing growth through feature expansion.

Notion, the workplace productivity unicorn, exemplifies this approach. Rather than pursuing growth through an ever-expanding feature set, the company doubled down on its core collaborative workspace while systematically addressing friction points that limited adoption within enterprises. This focused approach has enabled continued growth despite market headwinds, positioning the company for sustainable success.

The Business Model Evolution

Many surviving unicorns are fundamentally evolving their business models to create more sustainable value capture mechanisms.

Dropbox, while not a recent unicorn, provides an instructive example. The company systematically transitioned from a storage-centric freemium model to a collaboration platform with robust subscription tiers. This evolution dramatically improved retention and average revenue per user, enabling profitability despite intense competition in the core storage market.

The Culture Shift

Perhaps most fundamentally, successful pivots involve shifting company culture from growth obsession to sustainable value creation. This requires redefining success metrics, adjusting incentive structures, and sometimes replacing team members who cannot adapt to the new reality.

 

The companies that thrive long-term aren’t just changing strategies; they’re building organizations with deeply embedded capital efficiency, customer focus, and operational discipline.

Preparing for the Next Cycle

Market cycles are inevitable. The unicorn correction, while painful for many companies and investors, is ultimately creating a healthier innovation ecosystem. Companies that successfully navigate this transition will emerge stronger, with sustainable business models and the discipline to weather future storms.

For founders at earlier stages, the lessons from this correction are invaluable. Rather than chasing growth at all costs, building with capital efficiency and sustainable unit economics from day one creates both resilience during downturns and optionality during boom times.