Unicorns in India- Their Growth and Challenges
Indian companies such as Zomato, Nykaa, Blinkit, Flipkart and BYJUs, among others, are now household names. A common point between all these companies is that they are, or have held a “Unicorn Status”. “Unicorn” is a popular term coined for start-ups whose valuation reaches 1 billion USD and are not listed on the stock exchange. The number of Unicorns in India has risen in the last few years, with an exceptionally high rise seen during the Covid-19 pandemic. The start-up landscape of India is ever-evolving and dynamic, with numerous opportunities constantly being presented. This growth of Indian start-ups reflects the constant innovation of the Indian population and India’s potential as a global power.
It is also interesting to see the pattern of Unicorn’s growth, with such an increase during the pandemic that “It’s raining unicorn” was the motto of 2021. The increased digitization in consumer behaviour, tech integration within several fields and increased digital adoption are factors that led to its growth. Moreover, investments were rapidly coming in globally towards the healthcare and technology sectors such as Edtech, Healthtech, E-commerce and more. The work-from-home scenario of the pandemic gave entrepreneurs the time to invest in creating and building their own ventures. These several factors created a start-up hub in India, now every 1 out of 10 Unicorns globally has been founded in India (Investing India, 2023).
A company such as Nykaa, which was previously a Unicorn, is now thriving and has even reached the next stage- Decacorn, a company with a valuation of more than $10 billion. However, this is just one success story and India is filled with several. Flipkart is another example, it revolutionized E-commerce and consumer shopping behaviour in India. While previously a Unicorn, Flipkart has grown exceptionally well and even went on to raise $3.7 billion in 2022. Healthcare startups like Pharmeasy- an online pharmacy, or Cure Fit- a health and wellness platform created under Cult Fit; have all reached Unicorn status in India and are further expanding. Pharmeasy is even looking to go public soon. An avenue India has not ventured much into is social media and social commerce, however, startups and unicorns have still been created here. There is Meesho, an online reseller network which entered the Unicorn space with a value of over $2 billion (Investing India, 2023).
Recently, however, the growth in Unicorns has stalled with only three being added in 2023. Last year India saw the addition of 24 Unicorns; this massive drop reflects a slowdown of the start-up scenario in India (Vivek, 2023). The reason behind this is termed “Funding winter”, a period of low capital inflows and investments which is largely due to excess caution among investors and a fall in investor confidence. Startups should look to increase funding by enrolling for various government grants and schemes, making use of incubators and working with funding platforms that can assist in equity fundraising. However, start-ups have largely focused on growth and not profitability. Now with the onset of a funding winter, their focus needs to shift to attain long-term sustainability. Statistics show that of 85 start-ups by the end of 2022, only 15% of them were profitable. This does not mean that the future of Indian startups is bleak, being an evolving and dynamic area, there are always possibilities for growth. This is especially apparent in India, a country with tech-savvy and risk-taking entrepreneurs.
Arshiya Khattar, the writer is a student of Economics at KREA University and former intern, VeKommunicate.