2021-The Story Behind Indian Year of Unicorns

52 weeks and 44 Unicorns, this is a brief introduction to the Indian Unicorns’ success story in 2021. How did that happen so fast? What are the factors contributing to rising unicorns in India?

Needless to say, 2021 was the year of becoming better and brighter for Indian startups. As many as 44 unicorn companies in India achieved billion-dollar valuations in 2021. The unicorn startup ecosystem in India showed immense growth as some of the best Indian startups raised IPOs worth 6.1 billion dollars As the number of unicorns in India grew multifold, the country surpassed the UK to rank as 3rd largest unicorn hub after USA and China. The manifold growth of unicorns in India raises a common question, “What are the factors contributing to rising unicorns in India?”

Along with factors catalyzing unicorns’ growth, the article also discusses the upcoming unicorns in India, most successful and best Indian Startups, and expected trends in 2022.

Also Read: Is SaaS shaping the startup landscape in India?

What is the meaning of a startup becoming a unicorn?

In recent times, “unicorn” is one of the most talked-about terms in the venture capital industry. The term “Unicorn” was coined in 2013 by Aileen Lee, founder of Cowboy Ventures. In technical terms, a unicorn is simply a privately held startup company whose valuation is above $1 billion. The unicorn startups are generally avant-gardes in their domain introducing disruptive solutions. Unicorns are representations of opportunity, innovation, curiosity, and sustainable solutions, all imperative factors to bolster the Indian Economy.

How many unicorns India had in 2021?

 At present, India has 81 unicorns, i.e., startup companies valued above 1 billion dollars. In 2021, 44 startups were added to the $1B club making it one of the biggest unicorn hubs in the world. The country ranks at 3rd position after the USA and China, in the Hurun Global Unicorn Index, 2021.

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Out of all Indian cities, Bangalore is where most unicorns are found in India. The city emerged as the Unicorn hotspot and 7th largest unicorn hub globally. The city recorded 18 unicorns in 2021 and has 35 in total. Delhi comes second with 13 unicorns and Mumbai with 11 unicorns, stands third.

India and its Giant Unicorn Landscape

The mind-boggling growth of the number of unicorns in India is evident by the following statistics:

• Indian startups IPOs raised $6.1 billion in 2021. The amount accounts for 70% of total IPOs this year.
• The fintech sector raised around $10.6 billion continuing its legacy of being the highest funded sector.
• In 2021, India saw the emergence of the first unicorn in the crypto, proptech, and healthcare industries.
• Acko Insurance, a digital insurance startup, became the first female-led fintech unicorn to enter the club followed by Mobikwik.
• The flourishing EdTech sector added three unicorns, namely, Eruditus, upGrad, and Vedantu to the list.
• The e-commerce industry recorded 9 unicorns in 2021, doubling the total number of unicorns in the e-commerce sector in India.
• Between the years 2015-21, the Indian startup ecosystem saw a 9X increase in the number of investors providing capital to the startup companies in India.

Thus, calling 2021 the year of unicorns won’t be an exaggerated statement. After all, India produced roughly one unicorn almost every nine days in the past year and 4 unicorns every month.

So, what are the key factors contributing to the rising number of unicorns in India?

What are the factors contributing to the rising number of unicorns in India?

The Indian startup landscape is the conflux of a giant typhoon whose formation is catalyzed by numerous positive factors. A series of factors are working together fuelling the transformation of best Indian startups into unicorns.

1. Manifold Increase in Internet Users in India

The pandemic brought a digital revolution causing an immense boost to the internet users in India. According to the IAMAI-Kantar ICUBE 2020 report, India will witness a 45% increase in the number of active internet users. By 2025, India will have around 900 million internet users up from 622 million in 2020. Besides, the per person internet usage also increased to 761 minutes per person per month. Moreover, the internet penetration in rural India will drive higher digital adoption in remote parts of India. Due to enhanced and rapid-paced digital adoption, the unicorn startups in India got to reach more potential consumers converting them into their trusted customers. This also enables the new Indian Startups to find their consumer base and a stable ground. EdTech startups especially benefited from the lockdowns as students turned to online coachings and tuition.

The pandemic augmented India’s digital transformation as consumers began to use digital services more frequently ranging from shopping, digital payments, online health and therapy consultations, and video conferencing – to fulfill their daily needs and business requirements. Indian startups understood the needs of the new normal and diversified their use-cases to attract more customers online. 

2. Enhanced Capital Injection from Domestic and Foreign Investors

As Indian demographics and enthusiasm supported its startup aspirations, investors harnessed upon the potential of Indian startups. This resulted in an immense splurge of private capital in startups evident in huge IPOs raised by Indian startups in 2021. The Indian startup ecosystem witnessed around a 9X boost in the number of investors and a 7X boost to total funding. At present, India has a robust venture community of about 2000 funds chasing 60,000 startup companies. As domestic demands increased, sectors such as Fintech, eCommerce, EdTech, and SaaS produced some of the fastest startups in India in terms of attracting investment. Even in 2022, global capital will shift from China to Indian startups especially due to the tech crackdown and ongoing funnel choking in China. 

3. A Robust Infrastructure Regime 

Robust infrastructure is the key factors contributing to the rising number of unicorns in India. Due to strong support from Union and State Governments, the Infrastructure services for startups have grown beautifully. India became the only country with a digital public trunk infrastructure consisting of Aadhar and the India stack. The digital public trunk will enable private entrepreneurs to build startups quickly and at reasonable costs. In addition, the initiative will provide solutions for identity, verification procedures, digital storage, and payments. Also, with a seven times increase in the number of incubators, a strong infrastructure base will provide a boom to Indian startups in 2022 as well.

These key factors are contributing to provide a facilitative environment for startups to grow into unicorns in India.

Also Read: Why MSMEs Require Fintech Solutions to Flourish in 2022?

• Non-traditional sectors and sub-sectors such as Cryptocurrency, NBFCs, D2C, Conversational Messaging, Exchanges, Cloud Kitchens, etc., entered the unicorn space.
• Three EdTech startups namely Eruditus, upGrad, and Vedantu made it to the unicorn list due to a shift towards online coaching. Byju’s, an old unicorn, is still the top fundraiser with an amount of $1.3 billion across several tranches.
• India added the youngest unicorn to the global list, i.e., Mensa Brands achieved the unicorn status in just 6 months of its inception.
• The e-commerce sector added 9 new unicorns including Meesho, Moglix, and InfraMarket, taking the total e-commerce unicorns in India to 18.
• The fintech sector remained the top performer followed by e-commerce. Fintech companies broke their previous year’s funding records by multiples due to a gigantic boom in India’s internet adoption rate. CRED, Mobikwik, BharatPe, Upstox, and Groww were major entries in the 2021 Indian unicorn list. 
• Mobikwik and Acko Insurance became the first two female-led fintech companies to enter the Indian unicorn list.
• In 2021, India saw the first crypto unicorns as CoinDCX and CoinSwitch entered the $1 billion club. These 2 unicorns alone raised around $300 million collectively in 2021.
• The healthcare sector witnessed an unprecedented boom as Pharmeasy, Innovaccer, Cultfit, and Pristyn care entered the unicorn space. The concepts and solutions ranged from providing e-pharmacy services (Pharmeasy), Patient relationship management (Innovaccer), and fitness help (Cultfit) to providing surgical care (Pristyn care). Digital transformation, the use of upgraded technology, and supportive frameworks by the Government are facilitating the growth of healthcare startups.
• 3 Indian software-as-a-service (SaaS) startups, MindTickle, Chargebee, and BrowserStack, entered the Indian unicorn hub this year. Moreover, as a sector, SaaS now contributes approximately 9 SaaS unicorns. Freshworks, Postman, Zenoti, Highradius, Chargebee, MindTickle, and Druva are some major players in the Indian SaaS unicorn list.

Upcoming Unicorns in India in 2022

In 2021, we saw a mind boggling upward trend as a record number of startups achieved billion-dollar valuations. Even in 2022, the new normal, i.e., digital revolution and adaptability will shape the Indian startups’ success story. 

In 2022, logistics company Delhivery, online car sales platform Droom, payments app Mobikwik, hotel chain aggregator OYO, and e-commerce platform SnapDeal will be launching their IPOs. 

The transition from Unicorn to Decacorn

The world is transitioning from unicorns to decacorns, i.e., companies valued at more than $10 billion. At present, India has just two decacorns- Paytm and Byju’s. With a fast-growing Indian startup ecosystem, we are expecting to see more Indian decacorns added to the list. However, the shift will need thriving digital payment frameworks, better penetration of online solutions, huge internet, and Smartphone user base, online business models coupled with robust policies, and an enthusiastic startup community.

The Road Ahead for Indian Startups

Along with conventional sectors fintech and e-commerce; now crypto, SaaS, and marketplace players marked their entry in the unicorn universe. Moreover, almost every conceivable sector has been facing potential disruptions from other startups. Be it retail, e-commerce, food, garments, payments, deliveries, entertainment, wealth management, or trading; there is always a startup at some place creating competition. Moreover, the ways and routes of funding are also changing. Startup funding in India as new funding routes such as venture debt, crowdfunding, revenue-based financing, bank loans, etc are coming up. Since the onset of the COVID-19 pandemic, we are seeing startups with small ticket sizes making it to the 1 billion dollar club. Such companies are writing their success story based on their brilliant concept, solutions, and business strategy.