On Monday, Bengaluru-based neobank Open mentioned that it had raised funds at a valuation of over $1 billion or about ₹7,500 crore. Along the way, this online-only banking fintech company became the hundredth startup from India to join the unicorn club, a valuation of over $1 billion. It is a key milestone for the Indian startup ecosystem. Globally, there are only about 1,000 unicorns, according to CB Insights, a research agency that tracks technology and startups.
While there are debates about overvaluation and bubbles, a billion dollar valuation is seen primarily as validation of a business model. Similarly, the growing variety of unicorns in India is an indicator of the growing maturity of the web business sector. Of those 100 unicorn startups, 60 achieved status in 2022 alone. In other words, India has produced more unicorns in the last 16 months than in the previous 10 years. Whether it’s the rate at which they grew up to become unicorns, the industries they work in, or the cities they come from, there are variations on these two units. That, sometimes, deserves a tone of caution.
A youthful cohort that attains the position of unicorn.
In addition to more startups becoming unicorns, in the last 16 months, more young companies became unicorns than ever before. Of the 60 who became unicorns, as many as 10 were based in the last three years alone. These are in alphabetical order Apna, BharatPe, CoinDCX, CRED, GlobalBees, Good Glamm, Mensa Manufacturers, MPL, Pristyn Care, and Zetwerk. Another 24 were between 4 and 6 years old. Within the 2011-2020 set of 40 unicorns, these numbers rose to 3 and 14, respectively.
Older companies are also becoming unicorns, indicating that membership numbers are becoming more varied. Another 16 companies were 10 years old or older, compared to 10 companies in the previous set. The age gap between the oldest and youngest member is 36 years in the 2021-22 set, up from 21 years in the previous set. Fractal Analytics, which became a unicorn this year, took 22 years to become one. 5 Star Enterprise Finance, which grew to become a unicorn in 2021, was founded in 1984. Sometimes it takes six to eight years to become a unicorn.
A storm of unicorns
The Covid-19 pandemic was disruptive for startups, because it was for another section. Initially, venture capital VC firms, the main source of funding for startups, withheld funding. They advised founders to take a closer look at their business models, minimize costs, and focus on profitability.
However, as the pandemic dragged on, three problems occurred. First, with people confined to their homes, the digital market expanded rapidly. Second, there was a lot of liquidity in the financial markets looking for funding avenues, and online businesses became attractive draws. Third, India’s capital market regulator eased the rules for loss-making start-ups to go public, causing companies like Zomato, Paytm and PolicyBazaar to open their shares on the market to the general public. For private venture capital firms, a public listing provides them with a quick exit route. All of this saw additional funding move into startups, and at much richer valuations. In 2021, India created 46 unicorns, more than in all previous years combined. Not even in the middle of 2022, the country has already created another 14 unicorns.
Mumbai captures as much as NCR, closes in on B’luru
Long considered the startup capital of India, Bangalore is home to 34 unicorn startups, which dominate the national numbers. It also added the most startups to the unicorn list in 2021-22. Mumbai had the surprise in this record, matching Delhi-NCR, which has been winning as much as Bengaluru in recent times. Towards three unicorns by 2020, Mumbai added as many as 11 in 2021-22, along with CoinDCX, Eruditus, and Gupshup.
Beyond the big metropolitan areas, Jaipur (CarDekho, DealShare), Thane (Infra.Market), and Hyderabad (DarwinBox) all registered their first unicorns in the 2021-22 period. That reflects a broader shift within the startup ecosystem, which has spread beyond the standard Bangalore, Mumbai, and Delhi-NCR hubs.
However, detailed disappointments continue
When it comes to sectors, the record 60 unicorns from 2021 and 2022 incorporate a mix of old favorites e-commerce and fintech and new topics wellness, artificial intelligence and crypto. However, e-commerce itself has become more layered. For example, seven companies that became unicorns in the last two years cater to business-to-business segments eg Moglix, compared to consumer-facing companies like Flipkart, one of India’s earliest unicorns.
Between the flow of capital and the resulting valuations, these companies are also being prepared to list their shares on the stock market and provide an exit path for non-public buyers. So far, five companies from this set of 100 unicorns have gone public, all 12 months ago. Only one of these five, Nykaa, is currently selling above face value. Since these companies are in the evolving business landscape, the value placed on them can sometimes be exaggerated.