The growth of Unicorn Start-ups in India

Unicorn is a term given to ‘start-ups’ who have a valuation of over a billion dollars.

The biggest ambition for most start-ups is to make it a billion-dollar company. The same holds true for India. It represents a huge milestone. The ‘unicorn’ status is a milestone, a much-prized tag.

Indian Unicorn startups
Source – Tracxn analysts

In 2012, InMobi became India’s first unicorn start-up. Snapdeal and Ola also attained the unicorn status in 2014. In 2016, this number increased to ten. The year 2018 became known as the year of unicorns. In 2018, as many as six new start-ups attained the coveted status. B2B ecommerce marketplace Udaan became the fastest company to do so.

In 2020, the pandemic weakened the economy. Even so, 12 start-ups from India attained unicorn status. While PhonePe reached a $5.5-billion valuation. It attained this valuation as an independent entity after its spin-off from Flipkart. India’s unicorn club boasts start-ups like:

-fin-tech major PayTM,
-mobility player Ola,
-food-tech start-ups such as Zomato, and
-Glance, Cars24, Postman, among others.

Six months into 2021, the Indian start-up club has already added 15 new start-ups to the coveted status. The country is already cheering in its new unicorns:

-Digit Insurance (insurtech),
-InnovAccer (healthtech),
-Five Star Business Finance (NBFC),
-Meesho (social commerce),
-Infra.Market (B2B ecommerce),
-CRED (fintech),
-Pharmeasy (healthtech),
-Groww (fintech),
-Gupshup (conversational messaging),
-Mohalla Tech (parent company of social platforms ShareChat and Moj),
-Chargebee (SaaS),
-Urban Company (home services marketplace),
-Moglix (B2B commerce),
-Zeta (fintech), and
-the latest -BrowserStack (SaaS).

On average, it takes about eight years for an Indian start-up to turn into a unicorn. That period has been shrinking.

In 2018, we predicted that India will have 100 unicorns by 2025. Oh, well! Looking at the current landscape, it’s expected that India may cross this number (100 unicorns) by 2023. With 52 start-ups in the club already and 10 unicorns added in first 4 months of 2021, we are open to interpretation.

One such unicorn is Zerodha which is completely bootstrapped and made in India. Zerodha, founded on August 15, 2010, by brothers Nithin Kamath and Nikhil Kamath. It is the largest retail stockbroker in India by active client base. It contributes upwards of 15% of daily retail volumes across Indian stock exchanges. In June 2020, it entered the unicorn club with a self-assessed valuation of about $1 billion. The valuation is based on ESOP buyback exercise. The company undertook valuing each share at more than four times of the book value of ₹700 per share. Before Zerodha became a unicorn, it was a ‘proficorn’. A proficorn is a bootstrapped profitable start-up, i.e., a start-up no external funding.

Indian Unicorn startups
Source – Chandigarh Angels network

“It’s raining unicorns in India.”

There are couple of reasons for a sharp uptick in the birth of unicorns. They are not hard to find. This is a consequence of a confluence of supply and demand. India is the world’s third-largest start-up ecosystem, and it is the fastest growing. A few factors contribute to the start-up growth story. These are as follows:

-large and diversified markets,
-technology innovation,
-disruptive propositions, and
-high-quality talent

One of the major reasons for these companies achieving the coveted status is funding. All the companies have raised funds through various rounds. It has come in through venture capitalists and private equity funding. They invest in the unlisted, start-up, and growth companies. This leads to the creation of unicorns.

Indian Unicorn startups
Source – ET Tech

What added rocket fuel to the unicorn growth is excess flow of the American dollar. Capital is cheap and interest rates are low, especially in the US. Start-up investments in the first five months of this year alone have touched a record of $8.76 billion. That is the record high for this period. This means investments are nearing the levels seen for the full 12 months of last year. At $8.76 billion, the amount of capital infused into the start-up ecosystem is almost 81 percent of the total $9.94 billion recorded for the full year of 2020.

All this is happening only because of one major reason – the potential of Indian economy. The scope for Indian start-ups is enormous with a vast rural population starting to see digitalization. Foreign investors are seeing this opportunity and grabbing it with both hands. They are not shying away from providing investments and funding into various sectors fin-tech and ed-tech.

Written by- Jainam Shah

Edited by- Vatsal Patel

The post The growth of Unicorn Start-ups in India appeared first on The Economic Transcript.

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