Is the Rise Of Unicorns In India Sustainable?

There is an appetite for risk capital, and nowhere does it look that the unicorn party for Indian startups is stopping any time soon

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This year has been remarkable in many ways for Indian startups. To begin with, India produced 15 unicorns in the first six months of 2021 compared with 11 unicorns in the whole of 2020. The total unicorn tally has now crossed 50 in the 10-year-old ecosystem. Money continued to pour into new-age technology enabled ideas to the tune of $7.8 billion in first half of this year against an average $10 billion in the last three years. At this rate, India may manage to get more than 100 unicorns by 2023. More interestingly, it brings to the fore the decade-old question of the ultimate litmus test: when will these startups come out with their IPOs? As per information available in the public domain, Paytm, Zomato, Policybazaar and PharmEasy are expected to hit the market anytime in second half of this financial year.


One burning question remains unanswered that continues to outfox people engaged in businesses with a traditional profit-driven mindset: how can loss-making companies command this kind of valuation? Is the age-old business theory changed to mean that the bigger the losses, greater is the valuation? Is this a bubble waiting to burst or is it sustainable? Well, let me address them from my learnings over the past six years of being in the ecosystem.

Traditionally speaking, after China rose to become the world's manufacturing hub over a 25-year strong period of growth, we can safely assume that everything became commoditised in the industrial setup. India joined the party quite late after the historic 1991 economic reforms abolished the "Licence Raj'. However, lack of infrastructure along with corruption and outdated policies, made us lose the race to global dominance. Therefore, setting up a new factory as an entrepreneur in today's times at a small scale with profit focus is non-existent. India remained a largely unorganised market till the last decade before the emergence of new-age ideas came into existence. India's first unicorn was Inmobi in 2011, which reached the status after their existence of more than 10 years. Today, this journey is reduced to almost half, and more importantly, we can find unicorns in every possible sector in Indian ecosystem. This era is defined by businesses, which are now expected to last for the next 100 years. Therefore, priority is not profit, it is "market share'.

Liquidity at the global level is at record levels. The US alone printed close to $4.7 trillion in 2020, and coupled with negative interest rates, it clearly indicated one thing: holding paper currency has no meaning unless invested in growth-enabled businesses. Therefore, money is flowing behind ideas that bet towards market dominance. It is not new at all, if we refer to a bit of history known to us: the rise of Silicon Valley in the 1980s in the US where Google and Apple debuted with similar thought processes. Today, just these two companies command a market cap of more than India's GDP. Innovation, scale, superior products, and efficiency of time are common elements in all tech-enabled businesses. In this century of digitalisation and social networks, information-sharing has become seamless. Therefore, now time is the most expensive commodity, and whichever platform adds value to save this precious commodity, gets the biggest audience at its disposal. Another trend that is clearly discernible is that these new-age startups are solving complex problems related to our demographic and unorganised manpower-driven nature of businesses of the past. Education, for example, remained a big issue for India as we set the goal of achieving full literacy for a population of 138 crore Indians. Well, now we have 4G from Reliance Jio, smartphones, and tech-enabled edtech startups such as Uncademy, Byju's, and 18 other unicorns in this space globally. This brings down logistic costs drastically, fees structures, and most importantly, offers flexibility of time to students. It also brings hope, possibility, and opportunity to Indians for a better future.

Over the last decade, there was a rise of unicorns across the globe. Currently, the pace is picking up and is likely to continue for the next 10 years. The US alone produced 132 unicorns in 2021! Clearly, unique ideas, or sometimes, outrageous ones are attracting capital at scale. There is an appetite for risk capital, and nowhere does it look that the unicorn party for Indian startups is stopping any time soon.