It's Not Raining Unicorns Anymore

The country witnessed 30 startups turning Unicorns-valuation of over $1 billion-between 2020 and 2021. However, the number and the speed of startups reaching the 'Unicorn' status has slowed down

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The Indian startup ecosystem remained resilient through the pandemic. The country witnessed 30 startups turning Unicorns—valuation of over $1 billion—between 2020 and 2021. However, the number and the speed of startups reaching the 'Unicorn' status has slowed down.


According to a report by Venture Intelligence, the Q2 of 2022 witnessed the making of only four Unicorns: Purplle, PhysicsWallah, Leadsquared and Open Financial Technologies. The number is significantly lower compared with the previous quarter (Q1'22) when 11 startups turned Unicorn. The last quarter of 2021 (Q4'21) minted 14 Unicorns. The Unicorn startups attracted approximately $8.5 billion worth of investments in the first half of 2022. This is a decline of 16 per cent compared with the first half of 2021 that witnessed approximately $10.1 billion being invested in Unicorns.

"Venture capital deals in India dropped 22 per cent in the first five months of 2022. Start-up founders are also hoping to see some participation from existing investors as industry experts expect this funding winter to last at least 18 months. If the current situation continues, the pace at which unicorns are growing at will slow down," said Ankur Bansal, co-Founder and director, BlackSoil

The numbers have displayed a stark contrast to what the startup space was assumed to be a year back. According to a report from NASSCOM and Zinnov, the Indian Unicorn startups raised a record amount of $24.1 billion in 2021. The report also predicted a massive increase in the number of Unicorns to 200 by 2025.

The market has been getting tougher due to the current macroeconomic and geopolitical factors, such as rising inflation rates, tightening of monetary policy across geographies, the Russia-Ukraine war, etc., which have resulted in a funding winter. According to a report by Hurun Research Institute in collaboration with Ask Private Wealth, approximately 122 startups from around 25 cities were on the road to becoming Unicorns in the next two to four years. The report highlighted the value of India's potential Unicorns to be around $49 billion, an increase 36 per cent as compared to 2021. The companies that are valued from $500 million to $1 billion are tipped to become Unicorns in the next two years. The companies that are valued from $200 million to $500 million have raised $7.7 billion in capital, according to report.

However, the fulfilment of the projections made previously look bleak especially with the onset of funding winter. Venture capital funding in Indian start-ups saw a massive dip of approximately 37 per cent in the second quarter of 2022. Fundings for early-stage start-ups have not halted. They have witnessed a marginal dip to $839 million in April to June quarter as compared to the January to March quarter. Despite the marginal dip, the funding numbers continue to be 30 per cent higher than that of the last quarter of 2021. Even though, the funding winter threatens to derail the progression, experts believe that it won't be the case in the long term.

"We don't think this number is under any threat. In 2021 alone, we had 40-plus startups gaining that status and another 20-plus in first four to five months of 2022. Good startups will continue to get funding, and attaining unicorn status will be a by product of this journey. India continues to be land of opportunities and now many startups after succeeding in home market will also look at large global play. This will attract more funding and consequent higher valuation," said Ankur Mittal, co-founder, Inflection Point Ventures.