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  • Writer's pictureThe Financial Literacy Cell

The Unicorn Chronicles: Exploring India's Startup Unicorns!!!

"It's raining unicorns" has been the motto of the year, with 44 unicorns pumped into the ecosystem and many more unicorns waiting in line. This year was great for startups in India - 42 of them went on to attain unicorn status. More startups joined this club in 2022 than in all preceding years combined. In this year alone, we witnessed the beginning of more than 10 unicorns.

But what is a Unicorn? A Unicorn is a term given to "startups" that have a valuation of more than $1 billion. Or simply put, it is what most people in the financial world call a "startup that is private-owned with a valuation exceeding $1 billion." The term “unicorn startup” was coined in 2013 by venture capitalist Aileen Lee, because just like the mythical creature, the statistical rarity of such a successful business venture is improbable but not impossible. However, this term is now known and used way more than it ever used to be.

In fact, it takes an average of seven years for nascent startups to grow into unicorns. While there is a lot going on in the fast-swelling world, India’s unicorn run is far from dropping. The country, which added over 40 unicorns to its growing kitty in 2022, is looking at another 45 or so start-ups that have the capability to achieve a $1-billion-plus valuation in the near future.

Reaching milestones was once considered elusive. In the year of the startup funding blockbuster, 42 unicorns were created in India, a 3 times jump from 11 new unicorns in 2022 and nine in the previous year. For instance, beginning with Digit Insurance on January 15 to Pristyn Care on December 8, the unicorns emerged from a wide range of sectors. The 42 companies are worth more than $90 billion. Mensa Brands, which acquires Direct-to-Consumer fashion, home, and personal care labels, became a unicorn within 6 months, making it one of the fastest unicorns in Asia. In March, Chennai-based NBFC Five Star Business Finance achieved status after 37 years in existence. Fintech was indeed the biggest contributor to the unicorn universe. The 7 fintech additions are CRED, Groww, Zeta, BharatPe, Mobikwik, and Upstox. Interestingly, as mentioned before, this massive boom in Indian unicorns isn't only occurring in one or two specific sectors but spans almost every sector. Byju's, an ed-tech industry leader, became a decacorn with an $18 billion valuation, and three of its competitors - Eruditus, UpGrad, and Vedantu—joined the unicorn club this year. Despite regulatory uncertainty, India also observed two crypto unicorns in CoinDCX and CoinSwitch Kuber. The B2B commerce space too saw a fundraising frenzy, with Moglix, OfBusiness, and Zetwerk turning unicorns.

So what triggered the unicorn rush this year? During the pandemic, WFH helped spur the growth of digital businesses in India, and the incident also brought about a long list of unicorns. The three main elements—a thriving digital payments ecosystem, a large smartphone user base, and digital-first business models—have come together to attract investors. Tech companies, which have become home brands, are contributing to the unicorn growth in India. Additionally, fintech, e-commerce grocery, and marketplace players are contributing the most to the unicorn universe.

It has also been the year of startup IPOs, as it has rained unicorns. The listing of Zomato, Nykaa, PolicyBazaar, and Paytm has boosted the startup ecosystem as it shows that India can provide an exit route to investors.

The crackdown on Chinese tech companies has helped India bolster its attractiveness as an emerging market alternative. Early-stage venture capital fund 3ONE4 Capital predicts that India will be home to more than 150 unicorns by 2025.

Furthermore, India has emerged as the 3rd largest ecosystem for startups globally, with over 66,359 DPIIIT-recognized startups across 642 districts of the country as of March 2022. India also observed the birth of 44 unicorns with a total valuation of $ 94.77Bn in March 2022. Bengaluru, Delhi, NCR, and Mumbai continue to be the top cities of choice for the unicorn's headquarters in 2021. Unconventional sectors and sub-sectors such as NBFCs, cryptocurrency exchanges, D2C, cloud kitchens, etc. marked an entry into the unicorn space. Indian unicorns are also looking for a public listing avenue as a next step to realize their growth potential. Some big unicorn names offering an IPO include Zomato, Nykaa, PolicyBazaar, and Paytm, while many are already in lines such as Mobikwik and CarDekho. Today, one in every 10 unicorns globally has been born in India.

We see Unicorns operating in Tier I cities, but this ecosystem is unrestricted and extends to the last autonomous region of the country. Traditional sectors such as Fin-tech, E-commerce, and supply chain management, and hence, from "Sarkari Naukri First" to "Naukri First" to "Starting Up," as an economy, have come a long way. Logistics, Internet software, and services dominate this area, but strong waves in non-traditional sectors such as content, gaming, hospitality, data management, and analytics are conquering the list.

Investors in Unicorns -

Sequoia is the most active investor in Indian unicorns, followed by Tiger Global Management, Accel, and SoftBank. Furthermore, traditional funding methods have also shifted, and startups are now looking at alternatives such as crowdfunding, revenue-based financing, venture debt, and bank loans. Startups like Zerodha have been bootstrapped since their inception, changing unicorn funding standards and promoting independence from the very beginning. The global startup ecosystem is witnessing a shift as the world is increasingly realizing the potential carried by startups. We would eventually transition from the age of unicorns to the age of decacorns. A decacorn is a company with a valuation of more than $10 billion. As of January 2022, 46 companies worldwide have achieved Decacorn status. There are four startups in India - Flipkart, BYJU, Paytm, and Swiggy, which are included in the Decacorn cohort.

This is a testament to India’s vibrant startup ecosystem. Hence, from "Sarkari Naukri First" to "Naukri First" to "Starting Up," as an economy, we came a long way. Unicorn start-ups have grown and diversified to meet the needs of their targeted consumers and generate revenue from their products/services.

- By Pranjal Rustagi

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