EmergenceofofUnicorns

Emergence Unicorns amid

amid Global
GlobalPandemic
Pandemicinin
India
India

INTRODUCTION
A unicorn is a startup valued at or worth USD one
billion. The name emerges from the mythical
creature’s rarity and is metaphorically used to
represent the statistical rarity of successful
ventures. In 2021, India registered 44 new unicorns
with valuations at or above USD one billion amid
the global pandemic. India registered new unicorns
faster than the United States of America (USA), the
United Kingdom (UK), and other countries. In
January-March 2022, 13 companies were on the
list of the unicorn club. Moreover, about 75
startups are listed in the soonicorn list - companies
that will likely achieve the USD one billion mark
soon. Meanwhile, reports believe that by 2025,
India may have over 200 unicorns as startups are
increasing in number and size at a rapid pace.
India has emerged as the third-largest country with
unicorns after the USA and China. The listing of
unicorns like Nykaa, Zomato, and Paytm on the
public markets reflects the growth of the startup
sector in India. While the global economy is
struggling and adjusting to the changes instilled by
the COVID-19 pandemic, India’s unicorn growth
doubled in the year 2021 itself. Therefore, it is
appropriate to analyse the emergence of Indian
unicorns amid the global pandemic and their future
proposition in a post-pandemic world.
BACKGROUND
InMobi was the first unicorn in India in 2011. Up
until 2017, India added ten unicorns to the list.
Indian unicorn setup picked up pace in 2018 when
in a single year, entrepreneurs added ten unicorns.
Since 2018, the growth of unicorns has increased
approximately every year. In 2021 during the
pandemic, 44 privately held companies turned into
unicorns with a total valuation of USD 93 billion.
From January-June 2022, 14 unicorns have
emerged with a total valuation of over USD 18
billion. From 2015 to 2021, India’s startup
ecosystem has witnessed exponential growth with
nine times increase in investors, and seven times
increase in the total funding of startups, and the
number of incubators.

Emergence of Unicorns amid Global Pandemic in India Page | 1


GLOBAL PANDEMIC
SITUATION
The COVID-19 pandemic changed business
practices and induced new activities regularly.
Globally, 2021 was a year of unicorns as 254 of the
USA’s 489 unicorns came in 2021. China followed
the same trajectory; of its 301 unicorns, 74 were
listed in 2021. India’s unicorn scenario also
accelerated in 2021, as out of 90 unicorns, 44 came
up in the same year. Time taken by an organisation
to become a unicorn is reduced from 7.7 years to
6.6 years in 2021. During the pandemic, startups
were the fastest to become a unicorn.
In 2021, startups became the most efficient
element of the Indian economy, with companies
starting to provide services ranging from food,
grocery, medicine delivery, payment options,
online consultation, education, entertainment, etc.
During the pandemic, people’s behavior towards
startups changed. Hence, even after the pandemic
has slowed down, people are ready to continue
with the services provided by these companies.
With loyal customers and continuous
subscriptions, startups are driving the unicorn
boom in India.
FACTORS LEADING TO THE
INCREASE IN UNICORNS
During the pandemic, education, entertainment,
and consultation services shifted online. Due to
Emergence of Unicorns amid Global Pandemic in India
this, India’s internet Total Addressable Market
(TAM) increased rapidly with people and
enterprises moving to internet-based services.
India’s comprehensive internet coverage impeded
creative startups from aligning their operations
with need-based initiatives. Three factors have led
to the boom of startups and, consequently,
unicorns in India- wide-ranging digital payment
mechanism, a large smartphone user base, and
digital-first business models. The growth of
unicorns is due to the global pandemic and the
consequent shift to digital spaces. Due to the
disruption in supply chains, investors are
diversifying their investments toward developing
nations, and Indian startups have benefitted from
the phenomenon. Furthermore, due to the
growing internet user base, services are reaching
remote places with the digital divide reducing
significantly.
FOREIGN VERSUS INDIAN
INVESTMENTS
Investments in India’s unicorns are diversified and
come from foreign and Indian investors. Prominent
investors are Tiger Global, Sequoia, Soft Bank,
Alpha Wave, DST Global, Norwest, etc. Tiger Global
and Sequoia are USA-based investment
management and venture capitalist firms putting
regular investments into India’s budding startup
sector. The third-largest investor among Indian
unicorns is Chinese investment firms. These firms
have stakes in unicorns like Zomato, Groww, Ola,
Byju’s, Paytm, etc.
Regarding Indian investments, Mumbai-based
SprintUP is the most prominent backer of the
country’s unicorns, with 23 unicorns in its portfolio,
including Swiggy, PharmEasy, Byju’s, etc. Another
corporate venture capital firm, Brand Capital
overview, has invested in 11 unicorns.
The US has the highest number of investments in
Indian unicorns, with 106 firms, whereas China has
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ten firms. The following chart analyzes the country-
wise distribution of investors.
SUCCESS RATIO
Concerning sectors, Fintech was the leading sector
in unicorns with 24 percent coverage, followed by
SaaS, which has 22 percent coverage in the unicorn
ecosystem. Meanwhile, sectors like Edtech,
Foodtech, and Mobility had four percent of the
total unicorn share. Unicorns like Apna.co, Udaan,
Ola Electric, CRED, and MPL took about two years
to make their startup a unicorn.
Although India produced unicorns at an
unprecedented pace, the profitability of these
unicorns remains questionable. According to
reports, out of 100 unicorns India had, only 23
gained profits in FY 21, whereas the rest were in
losses. The top five profitable unicorns are Zoho,
Emergence of Unicorns amid Global Pandemic in India
InfoEdge, Zerodha, Five Star, and Dream 11. For
instance, Paytm and Zomato listed themselves in
an Initial Public Offering (IPO); however, the
considerable fall in the share price has led to
investor backlash. The shares of these unicorns
have fallen below the price of their IPOs.
Indian unicorns need to make their companies
more sustainable to remain on the list. The
government should collaborate with the
entrepreneurs to reduce obstacles. For India to
have 250 unicorns by 2025, the government needs
to increase its initiatives and concentrate on
resolving structural issues of the economy,
attracting foreign investors, and improving the
ease of business. The ease of doing business will
prevent the migration of already established
unicorns to cities like Dubai.
IMPACT ANALYSIS
The growth of unicorns boosts Indian business. The
government’s initiatives to support startups and
entrepreneurs are a step in the right direction as
these schemes help convert challenges into
opportunities. In the coming years, the startup
industry is set to flourish.
The growth of unicorns has led to job creation and
innovation. The most profitable sector that has
emerged in the unicorn ecosystem is Fintech.
These unicorns have contributed to the
enhancement of the microeconomy of India, with
digital payments becoming the norm. Moreover,
EdTech is also an emerging sector that will witness
growth because of its flexibility and easy
approach.
The growth of unicorns signifies
 the improvement in the ease of doing
business in India with government support
and international and domestic
investments.
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  Government support through tax
relaxations and single window clearance to
quickly realize their objectives.
 However, there are still concerns about
the complex process, bureaucratic
hurdles, and lack of clear guidelines in
getting government funding.
 To make funding easier for start-ups, the
government machinery is likely to create a
conducive environment and set up a
governing body to oversee the
implementation of government schemes.
The global pandemic had an adverse impact on
almost every aspect of doing business; however,
the startup industry changed it to enhance its
profit and therefore made it an ‘Aapda mein Avsar’
(Opportunity in Disaster).
India is becoming a pioneer in unicorn
establishments as the country experienced
exponential growth in recent years, particularly
during the pandemic, with 44 unicorns coming up
in a single year. During the pandemic, people
started looking for subscription-based platforms
when mainstream economic activities shifted to
the digital landscape—in this context, already
established and newly emerging start-ups gained
from the widening Internet users. The latter
efficiently delivered their customers with most
basic to complex products. With the pace with
which Indian consumers are shifting their
consumption practices, reports suggest that by
2025 India will have 250 unicorns.
Emergence of Unicorns amid Global Pandemic in India
There are concerns about the viability of services
provided by unicorn start-ups. However, the
subscription model's flexibility is higher as the user
gets more value while not completely committing
to the service. The Indian economy is characterised
by its growing unicorn sector; however,
entrepreneurs need to make the ventures more
sustainable and adjust them according to the
demands of a pandemic-driven world.
CONCLUSION
There are several opportunities and challenges for
unicorn startups in upcoming days. Although
Indian unicorns have doubled in 2021 and received
investments from a broad spectrum of foreign
investors, it is pertinent for the government to
note that these unicorns will not function without
its complete support and therefore require special
attention.
According to reports, as on May 2022, out of 100
unicorns, only 23 are making profits. The non-
profitability raises the question of the sustainability
of these unicorns. Therefore, the stakeholders
must help sustain the existing unicorns and
introduce schemes to achieve more unicorns in the
coming years. Similarly, the government should
fully support unicorns and entrepreneurship by
minimizing the bureaucratic obstructions,
improvising the regulatory mechanisms, and
working towards decreasing the digital divide.
These steps will ensure a better environment for a
unicorn to grow and sustain.
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CONTRIBUTOR

Shivam Tiwary is pursuing Masters in International Studies from CHRIST (Deemed to be

University). He is working as a Management Trainee in the Predictive Risk Intelligence
team at MitKat Advisory.

MENTOR

Madhura Chanda is a Geopolitical Intelligence Analyst as a part of the PRI team at MitKat
Advisory. She holds a Master's degree in International Relations with focus in Indo Pacific
and is interested in the foreign policy behaviour of the APAC region.

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