Average Time Taken To Turn Unicorn Falls From 8.4 Years In 2022 to 5.5 Years In 2023 The only two sectors that saw unicorns emerge were fintech (InCred) and e-commerce (Zepto)
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The average time taken for startups to attain unicorn status has fallen from 8.4 years in 2022 to only 5.5 years in 2023, says a report by Orios Venture Partners, which also says that while India witnessed a total of only 2 unicorns in 2023, it continues to be the third largest nation with the most number of unicorns.
Commenting on the report, Rehan Yar Khan, Managing Partner, Orios Venture Partners said "Though 2023 saw only 2 Unicorns, we are excited to note how in the last 4 years startups are taking 5 to 6 years to get to Unicorn status vs 8 to 10 prior to that. That shows the market has become large. We also love how many Unicorns are profitable and in our conversation with several Unicorn founders, profitability was a big focus area. Both these factors point to there being a significant number of tech IPOs in 2024 and the years to follow."
Other key findings of the report:
- The only two sectors that saw Unicorns emerge were Fintech and e-commerce (Incred and Zepto respectively.)
- 80% of Indian Unicorns are founded by Engineers. While 75% of Unicorns are founded by first-time founders
- Mensa Brands took only 6 months to turn Unicorn in Nov '21 after raising the first $50 Mn round in May '21.
- Five Star Finance is the slowest Unicorn so far, taking 37 years to achieve Unicorn status.
- A total of 44 startups became Unicorns in less than 5 years.
The importance of unicorn status
In the recent few years, experts have spoken about how even though unicorn status is undoubtedly something to celebrate, it should not be the only goal. It only indicates that a small startup has been able to scale and mature, that it has been able to raise monies and that the founders have been able to weather the ups and downs of building the company. It also helps in quick brand building to attract talent and customers.
"At one time, 100 Cr. club was what Indian businesses eyed, thereafter it went to $100 mn and then $1 bn and finally $10 bn. Businesses move up this ladder consistently. Apple and Amazon opened doors to trillion-dollar companies also. If a billion-dollar company is turning bankrupt three months later, it reflects the froth and not the real value created by the company, it should be sustainable. If a company with negligible revenues is achieving unicorn status then such is a sham. One can achieve a Unicorn status by raising $ 1 million for 0.01 per cent dilution but is it really a sign of value creation?," said Brijesh Damodaran, cofounder and chief investment officer, Auxano Capital, in an earlier interview.
The report also said that startups raised $8.2 Bn in 2023, highlighting a 72% decrease in funding from 2022, having $25 Bn raised. The number of startups IPOs increased to 8 in 2023 compared to 4 in 2022. The year also saw 123 acquisitions in 2023 as opposed to 229 acquisitions in 2022.
Another recent report by InnoVen Capital, a venture debt firm, also said that 68% of those who attempted to raise had a favorable fundraising experience in 2023, down from 71% in 2022. It also added that founders are more optimistic about 2024, with 78% of founders expecting a favorable fundraising environment.
"2023 was yet another challenging year for the start-up eco-system, with a weak funding environment and a tough global macro. On the positive side, we are now seeing a higher appreciation for sustainable business models, more focus on unit economics/ profitability and realistic valuation expectations," said Ashish Sharma, managing partner, InnoVen Capital India.