India’s Surge in VC Minting Unicorns at a Record Pace

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A decade since the birth of its first unicorn—InMobi, India added three ‘unicorns’ per month in 2021 to nearly double the overall number of startups valued at over $1 billion to 51 as of end-August. Investors have funnelled $23.5 billion into Indian startups so far this year which also helped create new unicorns at an unprecedented pace.

Out of 41 India-based companies valued at $1 billion or more, a record 17 were minted this year. The latest addition to the unicorn herd is Apna, the 2-year-old developer of a job recruitment platform for blue-collar workers that last week raised a $100 million Series C round led by Tiger Global. In fact, Tiger Global’s capital has helped produce nine unicorns in the country this year. The firm first backed India’s e-commerce giant Flipkart, now valued at $37.6 billion, more than a decade ago.

On Wednesday, Union Finance Minister Nirmala Sitharaman commented on the surge of unicorns, stating that the Indian economy had witnessed the creation of 28 unicorns, or startups valued at over $1 billion, this year on the back of a series of reforms unleashed by the Centre. As a result, a series of reforms have been unleashed, and different capacities of the Alternative Investment Fund (AIF) have been given more flexibility.

Though numerous factors have played a role in this sudden surge, one dominant external factor is the pandemic that accelerated the adoption of technology and tech-enabled business models. Firms with a product-market fit are scaling faster than ever, allowing them to tap into large profit pools with maturing unit economic models. Consumers are becoming heavily dependent on technology, leaving a direct impact on the decisions of many service providers like Zomato, a food delivery company that went public this summer at over a $12 billion valuation. Digital payment company Paytm and MobiKwik, a fintech startup, also announced their plans to hit the public markets this year.

The reasons behind the downpour of unicorns start with the supply side. With the Federal Reserve printing money, low-interest rates in the US have created excess liquidity, which means an abundant supply of capital and dry powder for most venture capitalists and private equity managers that coincided with a rise in high-quality startups. Moreover, public markets remain buoyant, resulting in bumper gains for investors, hedge funds, and family offices. 

It’s a matter of a few years, reckon VCs, by when India will see the next big thing in the startup space: The decacorn, or ventures with a valuation of $10 billion-plus. So far, India has two of them in Byju’s and Paytm with valuations of $21 billion and $15.6 billion, respectively. Along with decacorns, another trend to emerge strongly is startups taking the primary market route with IPOs. Those with a revenue of $100 million are more likely to hit the public market as companies in such a revenue bracket have a more predictable growth, reasonable unit economics and are either profitable or have a path to profitability.

By 2025, the country is expected to host as many as 62,000 startups, including 100 unicorns, according to a report prepared by TiE- Delhi. The flow of investments suggests that non-tech sectors are also on the verge of entering the competition.



Categories: Venture Capital

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