A wave of seemingly endless cash has flowed into U.S. startups in recent years as investors seek spectacular profits from the next Facebook, Twitter, Snapchat or other unicorns.

Higher Expectations

That era may be over for young startups.

Startups that obtained their first round of  financing only a year or two ago may be in for a rude awakening as they seek a new round of funds, reported Bloomberg News, and many of them may go out of business. One worrisome sign: up to half of these startups is trying to sell their shares or take on convertible loans at the same price terms of previous rounds, Jim Kim, a partner at Formation 8, told Bloomberg. These kinds of deals were rare a few years ago. "It's a completely different environment now," says Kim, whose firm is raising money for a new venture fund.

Room for Deals

Based on new data provided by research firm PitchBook, the venture funding climate is cooling down from its peak in 2015, a period that saw more than 1,500 baby unicorns snag early-stage funding.  

To be sure, the amount of total venture money spent on startups is still large, even though it has slipped to $55.5 billion in the first three quarters of this year from $61.2 billion invested last year. Venture financiers such as Founders Fund, Accel Partners and Andresseen Horowitz have raised more than $1 billion each for new funds. But many of them are now choosing to invest more money in fewer companies, and that is leaving many baby unicorns in the cold.

New Reality

One startup that had to adjust to the new reality is Folloze. In April 2015, the Palo Alto, California-based marketing startup raised $3.3 million in seed funding, reported Crunchbase. New Enterprise Associates, TriplePoint Capital and Cervin Ventures led the round.

When co-founder Etai Beck sought to launch a second round of funding this year, investors were "way stricter" with revenue and customer expectation, he told Bloomberg News. In the end, Folloze was able to rake in $7.3 million in funding. Canvas Ventures and return backer New Enterprise Associates led the round with participation from other investors that included Cervin Ventures, according to Crunchbase. (See also, Why Silicon Valley Unicorns May Soon Be Extinct). But now that Folloze has the new funds, the bar for the company and its founders is higher than ever.