Unicorns mushroom as India battles the Covid pandemic

In September 2011, India’s corporate sector witnessed a watershed moment when InMobi, an ad-tech mobile company, became the first startup to attain the unicorn status - private companies valued over $1 billion - in the country. The next five years would see nine more reaching the landmark. By the turn of the decade, assisted by the growing internet penetration and digital payment adoption post-demonetisation, this number had risen to 37, as of December 2020.

If this doesn’t tell you the exponential growth the startup sector has seen in the past decade, consider this: just the bygone 10 months of 2021 have seen this figure nearly doubling to 71. In other words, 2021 has seen the birth of one unicorn every 10 days.

Although the second wave of the pandemic dented the recovery of India’s economy, it has barely impacted the startup ecosystem in the country. This is evident by the fact that Indian startups raised as much as $48.32 billion in the year 2021 so far. The period between April 2021 and October 2021 witnessed funding deals to the tune of $37.58 billion, a marginal 6% fall compared to the fundings during the same period last year - $40 billion.

A golden year

In the startup world, 2021 has been synonymously known as a ‘year of unicorns’ with 34 unicorn startups being added in the year.

Anas Rahman Junaid, Founder and MD, Hurun India, said: “Just a month ago, we launched a Hurun Future Unicorn List which ranked 82 startups categorised as ‘Cheetahs’, companies that could turn unicorn in two years, and ‘Gazelles’, companies that could turn Unicorn in four years. In less than 40 days, 9 ‘Gazelles’ in the list have turned unicorns!”

Interestingly, out of this year’s 34 unicorns, 10 of them entered the list between April and May 2021, whilst the country was being battered by a deadly second wave of the Covid-19 pandemic. This has happened due to investment pouring in from all across the globe.

The recent IPOs of Zomato and Nykaa and the next in line such as Paytm are endorsing confidence in India’s public market liquidity, which was one of the biggest earlier apprehensions, Junaid added. All these trends have accelerated investor confidence in Indian startups.

Besides this, 2021 also saw some of the startups entering the unicorn list in record time since their incorporation. Seven out of the top 10 quickest to turn unicorn achieved the feat in the year 2021.

Apna.co, a jobs search platform founded in 2019, became the quickest to turn unicorn in September 2021 in a record time of a little over two years. Earlier this year, Cred - a credit card bill payment platform founded in 2018 – turned unicorn in a little less than three years. In September 2021, Mobile Premier League, or MPL - a gaming platform founded in 2018 - entered the unicorn list in a little over three years.

The unicorn hub

Despite the booming unicorn landscape in the country, most of these unicorns are concentrated in three big cities – Bengaluru, NCR and Mumbai, in that order.

Out of India’s 71 unicorn startups, more than 40% of them, 31, are based out of Bengaluru making it the unicorn hub of India. Bengaluru is followed by the NCR accounting for 15 unicorns out of the 71.

Among the 34 unicorns of 2021, 14 (~41%) of them are from Bengaluru. Out of the top 10 quickest startups to turn unicorn, eight are based out of Bengaluru. In terms of funding raised by Indian startups, too, Bengaluru startups account for a significant chunk of it. Out of the $48.32 billion raised by Indian startups in 2021 so far, Bengaluru startups account for about $17.47 billion or 36.15%.

Fintech leads

While startups from several industries like software, automobiles, e-commerce, ed-tech and food-tech have been tremendously benefitted from the digital boom the world has seen post-pandemic, the fintech sector has come to the party like none other and have comprehensively outdone the rest of the industries. Of the $48.32 billion fundings in 2021, fintech startups raised $10.73 billion, accounting for about 22%.

“The increased funding into fintech startups post-pandemic is a positive sign for the startup ecosystem. It has been driven by the wider adoption of digital payments and financial services by millions of users in Tier-II and Tier-III cities along with the rapid digitisation of kiranas across the country, said Karthik Raghupathy, VP & Head of Strategy & Investor Relations, PhonePe.

The future outlook for fintech startups looks bright with significant headroom for growth in the adoption of digital payments by both consumers and merchants, added Raghupathy.

Out of India’s 71 unicorns, there are about 13 fintech startups (19%), followed by 10 software startups (14%), and 9 e-commerce startups (13%). Among the 32 unicorns of 2021, too, about 22% of them (7), are from the fintech sector.

“Digital payment has seen a growth of around 31% YoY. Pandemic was definitely a ‘growth hack’,” said Junaid.