I’ve heard the talk. I imagine you have too.

They say it’s ugly out there in the startup world. But after I break down the fears in the market, I’m going to show you why things will look up this year.

Sure, the evidence is hard to ignore.

Dozens of Unicorns such as Dropbox, NJOY and Blue Bottle Coffee are being marked down. (See this article for more details.)

Last quarter, the average valuation of startups dropped to $28 million from $68 million the quarter before. Even accounting for significant migration of funding to lower-stage rounds, that’s quite a plunge.

More Bad Signs

Fundraises are taking longer than before. (Raising at more reasonable valuations isn’t helping.) IPOs are happening less frequently.

And venture capital investors have been shouting from the rooftops to cut back on growth ambitions, costs and fundraising plans.

Stock market volatility has also dampened pre-IPO investor sentiment. Here’s what Mark Suster of Upfront Ventures has to say…

Frankly, it’s really hard to write checks at later-stage valuations when you know you’ll have to exit into the public markets or sell to a public-market company, and the stocks are declining precipitously. [Note: The Nasdaq has fallen almost 9% since the beginning of the year.]

Founders are getting the message. According to surveys, most expect they’ll have a more difficult time this year persuading investors to back them.

Unicorns have become too expensive for all but a handful of the biggest companies to buy. And they can’t (or won’t) IPO at diminished share prices that would mean major losses for their late-stage investors.

It’s gotten so bad that Unicorns are now derisively being called “Unicorpses.”

A Bursting Bubble?

You already know where this is headed.

Startups and their investors are in trouble. The good times are over. It’s what everybody is saying. So it has to be right.