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Startups Unicorn: Why Billion-Dollar Valuations are not a Measure of Success?

Startups Unicorn: Why Billion-Dollar Valuations are not a Measure of Success?


  • After Ola, Byju’s, and 22 other startups cut costs, startup job losses have reached 11,000 and counting
  • Over 11,000 workers have lost their jobs at Indian startups in the past six months
  • As 60,000 startup employees are predicted to lose their employment this year, things could become worse
  • How did these significant valuation gains occur?
  • But if the valuations are high, what is the issue?

Despite being a famed creature, unicorns are becoming prevalent in the startup ecosystem. In fact, a new unicorn is born into the Indian startup ecosystem every two weeks. For those who are unaware, a startup with a valuation of $1 billion or more is referred to as a unicorn.

Most of the unicorn startups are leading towards higher growth and potential which increases their valuations to billion-dollar but these unicorn startups make a pavement towards higher losses and debts.

Startup unicorns’ billion-dollar valuations excite investors and provide the funds that creative firms require to expand. However, they can also exert pressure on investors and entrepreneurs.

When Bigbasket and Flipkart were acquired by Walmart and Tata Group, Info Edge(India) and MakeMyTrip were previously listed, Hike, Shopclues, Snapdeal, and Quikr lost their unicorn status due to a decline in valuation, and Open was the most recent addition to the list, the total rises to 100.

A privately-held startup valued at $1 billion or more is considered a unicorn company. Aileen Lee, a well-known seed investor, came up with the phrase when she wrote about billion-dollar software businesses in the early 2000s.

Among the first startup unicorns were Google and Facebook. They were both established in the 1990s and the early 2000s, and they both quickly soared to billion-dollar valuations during a period when only 0.07 percent of software businesses had achieved this level of success.

The number of unicorn startups has increased since then. There will be more than 600 unicorns by the year 2022. But does success come with a billion-dollar valuation?


Without a doubt, 2022 will be a golden year for startups, particularly those in the growth stage.

As the seventh month of 2022 approaches, the Indian startup ecosystem has welcomed 17 new members into the exclusive $1 billion valuation club. The nation has already embraced its new unicorns —

  • Fractal (advanced analytics)
  • LEAD (edtech)
  • Darwinbox (HRtech)
  • DealShare (social commerce)
  • Polygon (blockchain)
  • Livspace (home interior and renovation)
  • ElasticRun (B2B e-commerce)
  • Xpressbees(logistics)
  • Uniphore (conversational AI)
  • Hasura (GraphQL developer)
  • CredAvenue (fintech)
  • Amagi(mediatech)
  • Oxyzo (fintech)
  • Games 24×7(gaming)
  • Open (fintech)
  • Physics Wallah (edtech)
  • Purplle (beauty)
  • LeadSquared (SaaS)

Additionally, there will be more. In 2022, over 50 Indian businesses might join the unicorn club—companies valued at over $1 billion each—according to PwC research.

44 startup unicorns appeared in 2021, compared to a total of 33 unicorns between 2011 and 2020.

Given the record-breaking year of 2021 in terms of investment flow and the appearance of unicorns from the Indian startup ecosystem, 2022 is anticipated to maintain the current pace.

So how did these significant valuation gains occur?

The value levels appear to have increased at an incredible (and unrealistic) pace over the previous year or two for a number of reasons:

  • Startups keen to maintain their privacy longer:

Early on, Indian startups had few options for leaving exit routes: either they could be acquired by a larger domestic or international business, or, if they persisted for a while, they could incorporate in Singapore or the US and then apply for a global listing.

However, entrepreneurs are now showing a desire to remain private for an extended period of time primarily to boost and enhance the company’s total worth and expand before filing for an IPO.

  • Assisted by private funds:

Of course, without the availability of funding from both VCs and PEs, this would not have been achievable. A good economic environment, and the positive India story, have both contributed to the money inflow being achievable. This stage of the cycle is marked by high growth and easy access to capital.

  • Founders who would prefer to grow pie overall than retain share:

One thing unites startups like Flipkart, Ola, and other big startups that have raised vast amounts of capital. After several rounds of fundraising, their founders now own minor portions of the businesses. For the benefit of the increase in market valuation, they are prepared to give up their stake.

  • These are the first and unique pioneers:

Most valuation talks and claims made by VCs and founders usually focus on just two things: the size of the Indian market and how well-positioned they are to attract the majority of potential clients.

Since they are creating this market from scratch and have low sales, none of these debates are grounded in the fundamentals of the company or its intrinsic value. The external growth stories appear to be taking importance because there aren’t any peers that are actually comparable.

Why should you have doubts about the most successful startups?


Investors base their assessment of the worth of a company on anticipated growth and potential rather than actual profit and revenue. Because of this, the valuation of a firm can soar with just a few enthusiastic investors.

Additional investors usually place their trust in the company because of these high valuations, allowing it to gain attention, and either scale up swiftly or be acquired by a larger company.

These high valuations do not always indicate future success. Extremely high valuations are linked to equally extreme levels of risk.

The valuation of unicorns should also be viewed with caution because it is based on the performance of similar companies. Theoretically, this comparison takes into account whether a startup’s goods or services will find a market.

However, these comparisons could provide incorrect equivalents. They can result in greatly inflated values that mislead investors because they don’t consider if the firm is losing money.

According to her, investors may receive a lower return than expected if a hasty billion-dollar value is made.

A startup’s true value may be covertly reduced by the commitments its investors make to it. Companies are not required to inform investors of their rights to shares, dividends, and cash flow before an IPO.

There may be more pressure on prospective investors to do investments in a firm before its valuation soars to unicorn status.

As a result of the emergence of these billion-dollar firms in India, industry organizations, accelerators, and think tanks are announcing that the Indian startup ecosystem has matured. The startup industry appears to be a great environment for everybody and everyone to be in.

But are there any flaws in this scenario?

Indian startup’s recently valuations:

The valuation growth during the most recent few months for some of the top Indian companies is shown here:

With the funding raised by the Google-backed neobank Open, India gave birth to its 100th unicorn. It’s interesting to note that 60% of these firms have only just recently joined the exclusive unicorn club—startups valued at $1 billion or more.

Startup CEOs, investors, and government officials all praised the landmark.


The financial performance of these firms remains in doubt even if the rate at which India is developing unicorn startups is increasing at a consistent clip.

Yet only a selected handful of startups have succeeded and managed to crack the code when it comes to startup profitability.

Investors and business owners should place more emphasis on companies’ paths to profitability than on absolute profitability, according to Siddarth Pai, founding partner at 3one4 Capital, which has supported unicorns like Darwinbox and Open.

The Board (of a corporation) and investors both consider two factors. How swiftly are you expanding, and is your route to profitability aligning or not? These are the two most crucial items, according to Pai.

Over 11,000 workers have already lost their jobs at Indian startups in the past six months

During the layoff season, e-commerce businesses lead, while edtech companies placed second.

The firing list also included seven unicorn startups: Ola, Blinkit, Unacademy, Vedantu, and Mobile Premier League (MPL). It should be highlighted that Blinkit, originally Grofers, had unicorn status at the time the layoffs were conducted but lost it once Zomato bought the company.

A fifth of the total affected employees worked for Ola, a major ride-hailing company.

2,100 contract workers hired by Ola to staff their dark store were sacked in April 2022. These layoffs resulted from its decision to drastically restructure Ola Dash, its rapid commerce company. Last week, it closed Ola Dash and its used automobile segment Ola Cars. There has not yet been any information about how many workers will be affected by these closures.

Zomato last week purchased Blinkit, which also fired 1,600 workers in March. Byju’s, the most valuable edtech business in the world, has also eliminated 600 workers at WhiteHat Jr. and Toppr. Additionally, Whitehat Jr. requested 1,000 employees to resign if they were unable to return to work.


The Indian startup ecosystem is not doing well as it did last year. The industry that flourished during the pandemic is now facing the full brunt of the Russia-Ukraine war, which caused inflation and a liquidity crunch and reduced entrepreneurs’ capacity to get funding. Investors are becoming more picky and cautious.

Along with other prominent EV businesses such as Okinawa Autotech, Pure EV, Jitendra Electric Vehicles, and Boom Motors, Ola Electric is being investigated by the government for faulty batteries in its electric two-wheelers.

The Center has now delivered show cause notes to EV makers, telling them why criminal action should not be taken against them for distributing substandard electric two-wheelers to the public in response to the ongoing EV fire accidents.

The EV manufacturers are required to provide a thorough response to the warnings by the end of July.

Indian startups may lose over 60,000 jobs in 2022

According to a report by IANS, India may experience more than 60,000 job losses in 2022 alone, driven primarily by edtech and e-commerce platforms, as businesses there continue to lay off employees to survive the funding winter.

This appears to have been interpreted by many of these startups as a license to terminate employees as part of a “cost-cutting exercise,” hurting thousands of people’s livelihoods in the process.

According to the research, firms like Ola, Blinkit, BYJU’s (White Hat Jr., Toppr), Unacademy, Vedantu, Cars24, Mobile Premier League (MPL), Lido Learning, Mfine, Trell, farEye, Furlanco, and others have fired close to 12,000 startup employees to date.

32 Indian firms, including unicorns like Cars24, Ola, Meesho, MPL, Trell, Unacademy, and Vedantu, have fired 11,168 workers so far. The social commerce platform Yaari from Indiabulls is also on the list.

3,379 employees were reportedly affected by 9 firms’ layoffs in just a month of May. There have been 18 startup layoffs thus far in June. However, at 2,409, there are fewer affected employees than in May.

The sector with the greatest layoffs has been e-commerce, then consumer services, then e-tech. 9,659 people across the three industries have been laid off by 21 startups so far. This indicates that nearly 9 out of every 10 laid-off employees were employed in consumer services, e-commerce, or edtech.

This is the reason why among all industries, edtech has received the most criticism. In addition to having laid off approximately 4,100 workers, it also resulted in the closure of two businesses. It appears that edtech startups have been disproportionately affected by the funding halt.

Unicorns of 2022


In the first quarter, new unicorns appeared at the same pace as in 2021. According to media reports, 14 firms joined the unicorn club in Q1 2022, including Games24x7, Oxyzo, CommerceIQ, Amagi, CredAvenue, Livspace, XpressBees, Uniphore, Hasura, LEAD, Mamaearth, Fractal, DealShare, and Darwinbox.

However, just four startups—Open, PhysicsWallah, Purplle, and Leadsquared—joined the exclusive club in the ensuing quarter or Q2, bringing the total to 18 in H1 2022. 43 startups had already achieved this milestone last year.

In startup terminology, a business valued at more than $1 billion is referred to as a unicorn. The first edtech business to accomplish this feat this year is PhysicsWallah. It ranks as the 101st company in India to receive this honor overall. At a valuation of $1.1 billion, the company has received $100 million in a Series A round from Westbridge and GSV Ventures.

The “only profitable unicorn in edtech”

Notably, PhysicWallah, the only successful unicorn in edtech, has been self-funded during its entire development. Yesterday, June 7, the company raised its first outside financing.

According to industry insiders, at least 50,000 more startup employees will likely be laid off this year alone under the guise of “restructuring and cost management,” despite the fact that some businesses continue to get millions in funding.

Startups, especially the ones that profited from a pandemic boom are feeling the squeeze now as valuations have started to sink, and finding new investment has been tougher than in the past.

But if the valuations are high, what is the issue?

The VC sector has its own unspoken regulations. A company’s private valuation is a signal to the rest of the investment community that things are looking up for the company’s future prospects as long as it keeps rising from one round to the next.

This is another reason why existing investors contribute a little amount to subsequent rounds as a sign of support even though they will not receive a larger stake. However, when valuations soar, a ceiling would be reached beyond which they will have outpriced and outvalued themselves out of any further private fundraising.

Second, it is inevitable that market conditions will vary. Markets always move in cycles as to how they are designed. Similar to a bull (boom) phase, a bear (bust) phase also exists, during which investments are less common and firm valuations are focused on internal factors rather than external growth tales, such as revenues and costs as well as profits and losses.

At this point, businesses with high burn rates but no matching financial results will stagnate or, worse yet, starve from a lack of new investment. This is not an “IF” question, but a “WHEN” question.


The startup scene all around the world is a graveyard of concepts and “unicorns” that were once valued in the billions but are now written off as a miscalculation and consigned to history’s footnotes. Zynga originally had a private market worth of $10 billion, was valued at roughly $7 billion when it went public and is currently valued at less than $2 billion.


Billion-dollar startup valuations should be used with caution when determining these companies’ success. Of course, there are incredibly successful startup unicorns, but prices depend more on speculation and potential than on actual research. This can place a lot of pressure on investors and founders to expand quickly and take calculated risks.

Despite these drawbacks, the number of startup unicorns is increasing, and unicorn valuations don’t seem to be declining. The ongoing buzz in the business world will help the entrepreneurs to establish companies that change the game in the business world, which can only be advantageous for the future of innovation.

Essentially, the amount of money raised, the growth rates attained, and the number of daily visitors is all old news. Furthermore, these are vanity metrics. A rigorous emphasis on the business foundation is the only thing that will keep a company in a good position for the upcoming year, decade, and even the upcoming century. The sooner Indian entrepreneurs and businessmen understand this, the better it would be for everyone involved.

Remember that it took Thumbs up, a soft drink company, more than three decades to reach a $1 billion valuation, which was achieved last year. Furthermore, entrepreneurs may not understand the risks and overlook the basics in a hurry to attain the status of a unicorn startup.

Unacademy and Vedantu, two Edtech unicorns, have been on a layoff binge this year. Maybe it’s time for businesses to place a higher value on their goods than on the status and fame that come with being a unicorn.

Maybe it’s time for companies to focus more on values than valuation.



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