The Venture Capital Reset: Why Silicon Valley is Rejecting Unicorns for Profitable ‘Zebras’

Anyone who has covered venture capital long enough knows that there is a certain silence on Sand Hill Road these days. It’s not quite defeat. It is more akin to the pause that occurs after a protracted dispute when both parties realize they have been yelling about the wrong thing.

This spring, if you walk into any partner meeting in Menlo Park, you’ll hear the word “profitability” spoken with an odd new reverence, almost like a prayer that, until recently, no one really believed in.

The unicorn was the only significant animal for over ten years. Limited partners signed checks believing that a single billion-dollar exit would cover the entire fund, founders chased it, and the media romanticized it. While it lasted, the story was lovely. The problem is that stories—even the most costly ones—must eventually be presented to the public. In 2019, WeWork’s cardboard horn fell off. In about the time it takes to renew a magazine subscription, Quibi debuted and vanished. A courtroom drama resulted from Theranos’ collapse. Investors used to almost blindly believe that scale, given sufficient funding, would will itself into a legitimate business, but each implosion eroded this belief.

A different animal is at the center of a quieter conversation that is currently taking place. When Jennifer Brandel, Mara Zepeda, Astrid Scholz, and Aniyia Williams first used the term “zebra” in their 2017 essay, it was initially written off as a form of activist branding. In the Valley, a lot of people rolled their eyes. Those same partners are still using the phrase in LP letters nearly ten years later. The joke seems to have evolved into a thesis while no one was looking.

The characteristics of a zebra are almost embarrassingly archaic. They make money. They are cautious when hiring. They maintain a close relationship with their clients. Despite never trying out for a Series D, Basecamp has been profitable for years. In 2018, Buffer made the well-known decision to buy out its venture capital investors, which at the time seemed like a minor rebellion but now appears to be a wise move. Patagonia continues to do what it has always done. While the founders of trendier companies post essays on LinkedIn about resilience, Publix, an employee-owned, unassuming company, transports over $54 billion worth of groceries annually.

The change is not unique to America. Scop-TI is a profitable and expanding worker-owned tea company in France that its employees saved from bankruptcy. Gojek, an Indonesian app, grew into a super-app while retaining local drivers and riders. Long before anyone in San Francisco needed a metaphor for it, family conglomerates like Tata in India and keiretsu networks in Japan had been using something akin to zebra logic for generations. It’s difficult to ignore the fact that, in many parts of the world, the ostensibly novel concept is just how business has always operated.

It appears that investors are catching up. For portions of the past ten years, US venture returns have underperformed public markets, according to study after study from Cambridge Associates. These days, European funds refer to “workhorse companies.” ESG regulations are no longer a marketing afterthought. Even LPs who used to scoff at impact framing are now raising more pointed concerns about cash flow.

Whether this reset will endure once interest rates decline and animal spirits rise again is still up in the air. Relapses are common in Silicon Valley. For now, though, there’s something almost revitalizing about the room as founders present using revenue slides rather than vision boards. Not enchanted. Not revolutionary. Just genuine, which turned out to be the more difficult thing to construct in the first place.