India to get over 100 new unicorns in 2022: HDFC Securities
India to get over 100 new unicorns in 2022: HDFC Securities
According to a survey by HDFC Securities, India’s unicorn craze continues strong, with about one unicorn being born every five days in the first two months of 2022. India is predicted to have over 100 new unicorns in 2022.
According to the brokerage, funding activity will remain strong in 2022, establishing a record number of unicorns.
“…In terms of value creation, India has come a long way…within the first two months of 2022, one unicorn will be added every five days, bringing the total number of unicorns in India to over 100, “According to the report.
In 2021, India will have added roughly 42 unicorns, compared to 37 unicorns in the previous ten years. According to the report, India ranks third in the world regarding the total number of unicorns.
“Increased digitisation (accelerated by COVID-19), low data rates (headed by Jio’s ), high-speed internet availability (optic fibre and upcoming 5G technology), higher engagement on applications (ordinary hours spent on mobile per user has increased 1.5x since 2019), brands shifting advertising budgets to digital platforms, and several people involved in innovation and startups, led by the ‘Atmanirbhar Bharati,’ are all contributing to India’s rapid unicornisation.”
A “unicorn” is a privately held startup with more than $1 billion market capitalisation. Aileen Lee, a venture capitalist, coined the term in 2013 to describe the uncommon tech startups valued at more than $1 billion.
HDFC Securities dubbed 2021 the “Age of the Unicorns,” claiming that unicorns were born due to an unprecedented surge in funding activity.
In 2021, the total funds raised by the 42 unicorns climbed by 11 times year on year (YoY) to $12.8 billion, while values increased by 5 times to $89 billion. The entire transaction value increased by 33%, from $16 billion in 2016 to $66 billion in 2021, showing a CAGR of 33%. Venture capital and private equity investments accounted for the majority of the increase. According to the research, the average contract size climbed dramatically from $8 million in 2016 to $32 million in 2021.
“Investors’ trust in India’s growth storey as one of the fastest-growing developing market economies can be attributable to significant fundraising rounds (Flipkart/ Swiggy/ Dream11 closed large funding rounds of $3.6/ $1.25/ $1.24 billion in 2021),” it noted.
Fintech and e-commerce together accounted for almost half of all funds invested. In contrast, combined health tech, media-tech, food tech, and edtech accounted for roughly a third of all money invested. According to the report, the tremendous growth potential and problem-solving/disruptive nature of startups were cited as reasons for confidence in the Indian internet ecosystem.
According to the report, the combined value of the 42 unicorns has increased by roughly five times in the last two years. “In India, the high growth factor has become a critical component for the spike in values of new-age digital businesses, and a similar trend can be observed; in the private arena as well.”
The 42 unicorns have a typical P/S (price to sales) ratio of roughly 18x, according to HDFC Securities. Indian unicorns are valued at a 3x premium to global unicorns, owing to the country’s high-growth potential and penetration storey.
According to the brokerage, while listed internet companies in India have experienced a recent downturn, their value remains high, similar to that observed in the global market. Unlisted unicorns have a higher valuation than listed unicorns, which it anticipates normalising as the companies grow and scale.
A unicorn is a startup valued at $1 billion or more in the venture capital industry.
Aileen Lee, the founder of Cowboy Ventures, created the word unicorn when she referred to the 39 companies having a valuation of above $1 billion. The phrase was coined to emphasise the rarity of such firms at the time. The concept of a unicorn startup has not changed since then. But, the number of unicorns has increased.
Unicorn startup characteristics
Being a unicorn isn’t simple, and each one has its own backstory and set of characteristics that have helped it thrive. Here’s compiled a list of characteristics that all unicorns share:
Disruptive innovation: Almost every unicorn has wrought havoc in the fields where they live. For example, Uber changed the way people commuted. Airbnb also changed the way people booked holidays, and Snapchat changed how people used social media, among other things.
The ‘firsts’: Unicorns are typically regarded as forerunners in their respective fields. They change people’s behaviour and gradually become a requirement. They’re also thought to continue developing to stay ahead of the competition.
High on tech: Another common theme among unicorns is that their business models are technology-based. Like Uber was able to get acceptance for its business model by creating a user-friendly application. Airbnb, too made the world feel smaller by harnessing the power of the internet.
According to recent research, software makes up 87 per cent of unicorn products, hardware makes up 7 per cent, and other products and services make up the remaining 6 per cent.
Consumer-centric: 62 per cent of unicorns are B2C businesses. Their goal is to make things simple for customers and become a part of their daily lives. Another significant feature of these firms is that they keep things affordable. For example, Spotify has made music listening more accessible to people all around the world.
Most unicorns are privately held, which increases their value when a larger corporation invests in them.
According to CB Insights, there are 361 private enterprises worth more than $1 billion globally. India has 16 firms, accounting for 4% of the global market. In addition, India is just a smidgeon behind the United Kingdom, which has 19 unicorns and a 5% worldwide share.
Can only a startup be a unicorn?
Yes, it is correct. Unicorn refers to a ‘startup’ with over a billion dollars valuation. The startups with a valuation of more than $10 billion are called decacorns. Dropbox, SpaceX, and WeWork are just a few of the decacorn companies.
List of unicorn startups in India
Flipkart: Flipkart is a successful storey of two friends, Sachin Bansal and Binny Bansal, who founded the company in 2007. Flipkart is one of India’s top e-commerce firms. With a current valuation of more than $15.5 billion, Flipkart is far ahead of all other e-commerce firms in India.
PayTM: Launched in 2010 by Vijay Shekhar and owned by One97 Communications, founded in 2010 when mobile phones had only recently entered the lives of Indians. One97 Communications evolved from mobile top-up service to a bus and rail ticket booking service, a bill payment enabler, and eventually to a full-fledged payment service provider for enterprises, and was renamed PayTM. PayTM has come a long way, with a current market capitalisation of around $2 billion.
Razorpay: A Bangalore-based fintech startup co-founded by Harshil Mathur and Shashank Kumar, recently raised $100 million in Series D funding from GIC, Singapore’s sovereign wealth fund, as well as Sequoia Capital and our existing investors Ribbit Capital, Tiger Global, Y-Combinator, and Matrix Partners, bringing the company into the unicorn club. They founded the company with the primary goal of assisting every business in accepting digital payments, and they have made major progress toward that goal over the years.
Meesho: Founded in 2015 by Sanjeev and Aatrey Barnwal, Meesho is a reselling platform for small and medium businesses that allows them to launch their online venture using social media platforms such as Facebook Instagram, and WhatsApp. The Bangalore-based firm claims to have 100K registered suppliers serving over 26K postal codes in over 4000 cities, earning over INR 500 crore (US $68 million at current exchange rates) in revenue for individual businesses.
PharmEasy: Dhaval Shah and Dharmil Sheth launched PharmEasy in 2015, and it offers a wide range of services, including sample collection for diagnostic tests, teleconsultation, drug deliveries, and more. It also gives pharmacists the option of combining purchase with delivery and logistics help. PharmEasy has established relationships with over 60K brick-and-mortar pharmacies and 4K doctors across India, covering 16K postal codes.
Cred: Founded by Kunal Shah in 2018, the Bangalore-based fintech business was just inducted into the unicorn club with a $2.2 billion value. CRED is a members-only club that offers appealing offers and access to high-quality events in exchange for timely credit card bill payments. It’s a tool that lets credit card customers manage various cards while also getting a credit score analysis.
Urban Company: It is an all-in-one platform that allows users to engage premium service experts, ranging from masseurs and beauticians to sofa cleaners, carpenters, and technologists. Urban Company was founded in 2014 by Abhiraj Bhal, Raghav Chandra, and Varun Khaitan. Over 5 million consumers have been handled by Urban Company’s network of 40,000+ certified service professionals in major metropolitan locations across the world.
Zeta: Ramki Gaddipati and Bhavin Turakhia founded Zeta in 2015, and the company joined the unicorn club in 2021 after raising $250 million in its Series C fundraising round. Zeta is a neo-banking platform that allows businesses to build interesting retail and corporate products by issuing credit, debit, and prepaid cards. Zeta also provides digitised solutions to businesses in need of automation.
BharatPe: Ashneer Grover and Shashvat Nakrani launched the company in 2018. BharatPe was the first UPI QR code provider in India, and it has since moved into other financial services. BharatPe is also the market leader in UPI offline transactions, supporting over 50 lakh merchants in 35 cities across India.
The Indian Unicorn Landscape
Startup Ecosystem in India
As of February 7, 2022, India had become the world’s third-largest startup ecosystem, with over 63,100 DPIIT-recognized startups spread across 638 districts. India is the second-best innovator among middle-income countries, with top rankings in scientific publications and university quality. India’s innovation extends beyond a few industries. We discovered companies solving problems in 57 different industries, with IT services accounting for 13%, healthcare and life sciences for 9%, education for 7%, professional and commercial services for 5%, agriculture for 5%, and food and beverages for 5%.
The Indian startup ecosystem has developed at an exponential rate in the recent several years (2015-2021):
- 9 times increase in the number of investors.
- 7 times increase in the total funding of startups.
- 7 times increase in the number of incubators
Indian unicorns are thriving in living in a fast and dynamic economy. These businesses are employing a large number of people and developing ground-breaking solutions and technologies. Until the fiscal year 2016-17, approximately one unicorn was added per year. The number of new unicorns formed each year has risen consistently over the last four years (starting FY 2017-18), with an astounding 66 per cent increase year over year.
As of February 9, 2022, India has 88 unicorns worth a total of $ 295.99 billion. In 2021, 44 unicorns were created with a total value of $ 94.37 billion, while 7 unicorns were born in 2022 with a total value of $ 9.12 billion.
Unicorns Of India
India has 88 unicorns with a total value of $ 295.99 billion as of February 9, 2022.
Most unicorns were born in India in 2021, 2020, and 2019, with 44, 10, and 9 unicorns born each year. The international economy has been devastated by COVID-19. Nonetheless, the tenacious Indian businesspeople have worked relentlessly to boost the economy and assist with COVID-19 relief efforts. In 2020, more than ten unicorns were projected to be born. The year 2021’s motto was ‘It’s raining unicorns,’ with 44 unicorns launched into the biosphere and much more waiting in line.’
Bengaluru is India’s unicorn capital, with one of the most unicorn headquarters, followed by Delhi and Mumbai. Unicorns can be found in Tier I cities, however, their habitat is not limited and can be found in the last district. Fintech, E-commerce, Supply Chain & Logistics, and Internet Software & Services, among other traditional areas, continue to dominate the market. Nonetheless, a new wave of unusual sectors is gaining traction, including content, gaming, hospitality, data management and analytics, and so on.
While each company’s journey to unicorn status is different, the average duration for a startup to become a unicorn is 6 months and 37 years. In just 6 months, Mensa Brands became a unicorn in 2021, making this one of Asia’s fastest unicorns.
India is quickly establishing itself as a worldwide unicorn hub. Here’s why
In general, the western media presents India as a developing country with a densely populated population and a low standard of living.
We don’t have any issues with their coverage, but painting a false image of a country is a severe defamation charge. India is a developing country, yet it is also true that it will become a superpower by 2050.
When it comes to Microsoft, Google, Twitter, and a slew of other corporations, an Indian is in charge. The question now is, why is this the case? The ability to run the organisation and be capable of dealing with obstacles, among other factors, is the solution.
India is the world’s third-largest startup producer, trailing only the United States and China. However, according to a government report, India is home to 88 unicorns with a combined valuation of $ 295.99 billion. In 2021, 44 unicorns with a total value of $ 94.37 billion were born, and seven unicorns with a total value of $ 9.12 billion were born in 2022.
The country is witnessing the most major positive development, with international corporations establishing R&D facilities in India to take advantage of the country’s advantages. According to data gathered, over 800 multinational corporations (MNCs) have created R&D centres in India in the previous ten years, employing over half a million Indians.
When Prime Minister Narendra Modi launched the Startup India initiative in 2015, it boosted innovation and the number of startups. The major goal was to create and support an environment that would allow businesses to develop and create more jobs for people. It also results in long-term economic growth.
The world has seen the unicorn startups in India, the way unicorn startups have raised, startups getting a huge amount of funding from companies like Sequoia Capital, startups turning into unicorns in less time, and many other things happen within this year bracket, especially in the last 6-10 years.
Significant progress has been made in the last few years, and various milestones have been reached. In India, for example, one out of every ten unicorns is born today.
Startups & Unicorns: Transforming India
According to the DPIIT (Department for Promotion of Industry and Internal Trade), over 61,500 startups have been founded in India, with 39,960 of them active. Correspondingly, in 2018, 2019, and 2020, 4200, 3500, and 1250 (roughly) startups were launched. In 2019 alone, 1,300 new tech firms were launched, meaning that 2-3 new tech startups are launched every day.
Women entrepreneurs accounted for 14% of all business owners, up from 10% and 11% in the preceding two years. Since 2015, investment for startups has increased significantly. The financing amount in 2021 will be $42 billion, compared to $5.7 billion in 2016. Enterprise tech has the most active startups (18.7% of the total number), followed by E-commerce (12.8 per cent), Fintech (12.1 per cent), Consumer Services (9.5 per cent), Healthtech (8.9 per cent), Edtech (8 per cent), and Media (7.9 per cent ) and Entertainment (8per cent).
Startups in India generate new technology and expand growth opportunities, putting a solid fight against Silicon Valley. Cred and PayTm are examples of startups that have grown rapidly and revolutionised the way people pay in India. Paytm has enhanced the online payment option in India following demonetisation.
On the other hand, Unicorns have experienced exponential growth in India, with a whooping 66 per cent year on year (YOY) growth. More than 44 unicorns were born in India in 2021, with a total valuation of $92.77 billion. Apart from Pune, Chennai, and Ahmedabad, the top cities where India’s youthful minds have created a platform are Delhi NCR, Mumbai, and Bengaluru.
India has seen the birth of two other unicorns named Mama Earth and Fractal analytics until the end of the first two weeks of January 2022.
According to research released in the Economic Times on January 15, 2022, India (90) is the third-largest unicorn hub after the United States (487) and China (301) and ahead of the United Kingdom (39).
Unicorns in India are also looking into public listing options as a next step in realising their growth potential. Zomato, Nykaa, PolicyBazaar, Paytm, and Freshworks are among the big unicorn names that have offered an IPO, while many more have Delhivery, Mobikwik, and CarDekho.
Entrepreneurship as a Job Creator
The majority of these businesses have been successful in creating large-scale jobs. Thousands of new employees have been generated by startups in the country this year, bringing the total number of positions in the startup ecosystem to more than half a million. According to estimates, recognised companies have helped create a considerable number of jobs, with 48,093 startups reporting 5,49,842 positions and an average of 11 employees per startup. In 2020-2021, recognised startups alone created roughly 1.7 lakh jobs.
India’s startup environment has to be strengthened even more, with a million startups as a goal. This will help India grow economically, but it will also help with employment issues.
Educational Institutions: Regeneration the Spirit
In today’s world, a country’s worldwide ranking is determined by its entrepreneurial activity in terms of innovation, competitiveness, and job creation, all of which assist the country improve and growing in terms of social and economic indices.
Education in India has re-ignited the entrepreneurial spirit of young minds in recent years, resulting in the exponential rise of startups and unicorns.
India, a developing country with many issues in various areas, will experience a huge increase in startups and unicorns in the following days. Blockchain, artificial intelligence (AI), and big data, which are drawing large early-stage financing deals, will provide greater prospects for growth for technology-driven firms. Agtech, blockchain, advanced manufacturing and robotics, AI and big data, and fintech are five sub-sectors that are rapidly expanding in size, with an average 107 per cent increase in early-stage investment agreements and a 43 per cent increase in exits.
With such growth, India can address challenges of employability and livelihood while also reforming specific industries for their social and economic output. AI, Big Data, and Analytics is the largest sub-sector, accounting for almost 27% of all global startups.
edited and proofrea by nikita sharma