Booming startup culture boosted by government initiatives like Startup India and Digital India, and rapidly changing consumer market demands.
From 35,000 registrations in 2016 to more than 55,0000 licenses in 2020, the start-up boom in India continues to generate global investor frenzy even amid the pandemic – with thousands of unique innovators swiftly traversing the billion-dollar journey from minicorns to soonicorns to the ultimate coveted goal: a Unicorn.
With nearly $50 billion raised in total in disclosed funding rounds, more than 15 unicorns have come up in India in the past two years, thanks to the rapid rise of the consumer market as well as the increasing adoption of digital services and products by individuals and businesses.
Overall, India has 37 unicorns today and growing – covering a vast range of products and services with companies as diverse as Zerodha, Icertis, Druva, Lenskart and Delhivery and PharmEasy.
Last month, reports emerged of Japan’s SoftBank being in final negotiations to invest $250 million in the Indian social commerce platform Meesho. Once completed, this would propel the Bengaluru start-up into yet another entrant to the coveted unicorn club during the Covid-19 pandemic. But Meesho isn’t even the first unicorn of 2021. In January, Digit, a start-up which works in the area of insurance technology, was adjudged a unicorn, after its valuation streaked up to $1.9 billion.
If that dizzying pace was not enough, a recent Nasscom report said that India will have more than 50 unicorns before 2021 is through, and more than 100 by 2025.
“Entrepreneurial activity has picked up in India. In 2020 India was among the top 50 innovative economies,” India’s Ambassador to the US, Taranjit Singh Sandhu, recently told a mentoring programme for Indian National Startup Awards 2020 finalists. “Today India is the third-largest startup ecosystem in the world and is home to unicorns valued at USD 73.2 billion. By some estimates, more than 50 ‘soonicorn’ startups might join the unicorn club as early as 2022,” he said.
In 2020 alone, Ambassador Sandhu said, Indian startups raised $9.3 billion until mid-December. “A little below 2019 but definitely encouraging, considering the current pandemic. It is because people like you were not averse to taking risks and were not deterred by challenges. People like you continued to think out of the box. People like you put all your efforts in creating a better life around you,” he said.
Indeed, India’s unicorn success has spread across sectors like e-commerce to education technology to food delivery aggregation and transport logistics. Meesho, for example, is a social commerce platform, where resellers can spread the word around of products available on the site through their social media networks like Facebook, WhatsApp or the like. Any sale that materialises through their effort translates into a commission.
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Of the new startups, a large number of soonicorns are from fintech, followed by 8 startups from ecommerce and 7 startups from the consumer services sector.
Fintech’s lead in this regard is thanks to the fact that digital payments has achieved deep penetration in India’s metros and Tier 1 cities. With that groundwork done, the customer base is more likely to adopt other digital financial services such as lending, insurance and neobanking. In particular, startups in lending tech and payments have contributed the most to the fintech soonicorn list.
In the post-pandemic world, health-tech startups are also showing a speedy rise to prominence, especially with India’s National Digital Health ID plan that will come into effect over the next couple of years. Several health-tech startups have thus been identified as potential unicorns or soonicorns by investors and venture capitalists.
PayMate, Digit Insurance, Mswipe, BharatPe, CRED are the top five Soonicorn fintechs in a list prepared by PGA Labs – exploring all finance segments and not just payment or credit. The soonicorn list also includes insuratech as the diversity increases in the fintech space. “Most of the FinTechs are working in the B2C segment. The FinTechs working in the B2B segment are gaining more attraction as merchants are willing to pay. We are also seeing a combination of businesses coming up in the FinTech space. They are not just pure payments or pure credit businesses,” said Shishir Mankad, EVP and Practice Leader at Praxis.
The startling rise of start-ups in India has also spawned a whole new trend – of one unicorn breeding another. Last December, short video platform Glance achieved unicorn valuation — but Glance itself is a subsidiary of InMobi, India’s first unicorn back in 2011. Similarly, Paytm’s spin-off Paytm Mall also achieved unicorn status like its parent company a couple of years ago. And Paytm is now not just a unicorn but a ‘decacorn’, or a company with valuation of more than $10 billion, joining an exalted club cohabited by the likes of edutech giant Byju’s and hospitality chain Oyo.
While India metros such as Bengaluru, Mumbai and NCR Delhi have changed the face of modern India and found a place among the best Global Startup hubs, cities like Pune, Hyderabad, Ahmedabad and Kolkata are also being counted amongst the most promising emerging start-up hubs.
“Indian start-ups are steadily evolving into global entities creating business products, and solutions for the global market,” said Ambassador Sandhu. “We need to do more to be counted amongst the ‘superstar hubs’,” he added.
Noting that India and Silicon Valley have a close relationship spanning over many decades, he said Prime Minister Narendra Modi’s visit to Silicon Valley in 2016 signified the importance of this entrepreneurial bridge and partnership.
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Sandhu said that Indian programmers, engineers and entrepreneurs are providing their skills and that too in sizable numbers to US companies. India is also a leading R&D hub for many of these companies. Many US-based venture firms have been investing in Indian talent and are amongst the largest players in the field.
The Indian government’s long-term strategies and concerted push through initiatives like Startup India and Digital India have joined forces with the embrace of digital finance, rise of Indian IT companies, large talent pool, increased expendable income of Indian middle class and availability of capital to significantly boost the growth of India’s startup ecosystem.
With the ecosystem in place and the resilience of the industry apparent amid the pandemic, innovators and entrepreneurs are thus braced for a promising journey to create hundreds of Indian unicorns in the near future.