This Essay highlights emerging governance problems presented by persistent Unicorns. It argues that recent market trends and deregulatory reforms have weakened or eliminated the principal mechanisms that imposed discipline on start‐up company founders. Recent scandals at prominent Unicorns suggest that investors have erred in placing blind faith in the honesty and capabilities of start‐up founders. Policymakers should learn from these disasters and close regulatory loopholes that allow Unicorns to persist in limbo between private and public status for extended periods of time.
Part I provides an overview of how the IPO has shifted from the preferred exit strategy in the eyes of entrepreneurs to a regulatory morass to be shunned. It traces developments in the market for start‐up company shares, and regulatory reforms that facilitated the proliferation of Unicorns. Part II highlights unique governance risks posed by Unicorns, addressing both societal and investor protection concerns. Part III offers suggestions on how to address Unicorn risks, and raises fundamental questions about the future of Unicorns in our economy.