Recently, the number of unicorns or privately-owned firms with a market capitalization of over USD 1 billion in India hit the 100-mark. A startup is considered a unicorn if it has a turnover of at least Rs 7,500 crore. The total valuation of these unicorns is USD 330 billion, that is over Rs 25 lakh crore. Remarkably, the average annual growth rate of Indian unicorns surpasses that of their counterparts in the U.S., the U.K., and many other countries.
Understanding Unicorns in India’s Startup Scenario
Unicorn startups are not merely financial behemoths. They are innovative entities dedicated to introducing new business models and creative solutions. These unicorns span various sectors like fintech, Edtechs, B2B companies, etc.
Key features of these unicorns include disruptive innovation, with many bringing significant changes in their respective fields, such as Uber’s transformation of commuting. They have technology-driven business models and a focus on simplifying consumer lives. Most unicorns strive for affordability without compromising on the quality of service or products. They are primarily privately owned, and their valuations often skyrocket when an established company invests in them. A recent report suggests that 87% of the unicorns’ products are software-based, 7% are hardware, and the remaining 6% encompass other products & services.
The Current State of Startups and Unicorns in India
India’s startup ecosystem has seen an impressive growth trajectory, making it the third-largest in the world, trailing only behind the US and China. In 2021 alone, 44 Indian startups have attained unicorn status, pushing the overall tally of unicorns to 83. The majority of these unicorns operate in the services sector.
This rapid growth in unicorns can be attributed to strategic and conditional factors, including supportive government policies, the swift adoption of digital services due to the pandemic, the surge in online services, and the work-from-home culture. The surge in digital payments and buyouts from major public corporations have further contributed to this trend.
Challenges Facing the Indian Startup Ecosystem
Despite its tremendous growth, the Indian startup ecosystem is not without its challenges. For instance, the availability of funds does not guarantee a startup’s success. As more funds are invested in startups, it becomes more challenging to generate value through revenues.
Additionally, despite India’s exceptional performance in the fintech and e-commerce sectors, its share in the global space economy is less than 2%. This situation is primarily due to the lack of a comprehensive framework providing transparency and clarity in laws for private participation in the space sector. Moreover, domestic investors in India’s startup sector, such as Japan’s SoftBank, China’s Alibaba, and Sequoia from the US, are often deterred by the inherent risks involved.
Government Initiatives Supporting Startups in India
To address these challenges and encourage growth in the startup sector, the government has launched various initiatives. These include Startup Innovation Challenges, which offer startups networking and fundraising opportunities, and the National Startup Awards, which recognize and reward innovative startups and ecosystem enablers.
Further measures include the ranking of states based on their support to startup ecosystems and the Shanghai Cooperation Organisation (SCO) Startup Forum to collectively improve startup ecosystems. The ‘Prarambh’ Summit also provides a platform for startups from around the world to present new ideas, innovations, and inventions.
Overall, the accelerated development of India’s startup ecosystem necessitates significant funding, calling for the critical role of venture capital and Angel Investors. Simultaneously, corporate India must also foster entrepreneurship and build impactful technology solutions for sustainable, resource-efficient growth. As global attention shifts towards India due to recent capital distrust in China, there is an urgent need for decisive policy measures, further bolstering the Digital India Initiative.
