The Global Unicorn Race: India lunging forward

For some time now, India has been lagging way behind China in the emergence of unicorn startups – those private entities valued at $1 billion and above. The tide finally seems to be changing this year, 2019 alone has produced over half a dozen unicorns so far, with a new one just last week.

“ Icertis, a contract management software platform raised $115 million led by US-based venture capital firm Greycroft and Premji Invest, the family investment office of billionaire Azim Premji.”

The other unicorns created this year include grocery startup BigBasket, trucking logistics firm Rivigo, ecommerce logistics firm Delhivery, software firm Druva, fantasy gaming startup Dream11, IT healthcare firm CitiusTech and Ola Electric, the electric vehicle arm spun off from ride hailing startup Ola.

India has jumped 14 places to the 63rd position on the World Bank’s ease of doing business ranking.
India is currently the third-largest startup ecosystem in the world. The number of tech startups reached 7,500 in 2018, a growth of 12 to 15 percent from 2017.

Huge Success :-

• With funding from Softbank and Airbnb, lodging aggregator OYO (originally called Oyo Rooms) has moved into more than 500 Asian cities in countries such as China, Japan, Malaysia, and the Philippines.
• Another example of how rapidly India’s unicorns can move from local prowess to global ambition is Think and Learn Private (more commonly called Byju’s), the world’s most valuable education technology business, with a $5.4 billion valuation.

Investors such as Tiger Global, Softbank etc. with deeper pockets, riskier appetites, patient timelines now chasing opportunities in India on the back of early successes (Flipkart exit). This has partly been due to an upswing in investor interest in India, diverted from its northern neighbour(China) after a slowdown there.

China’s slowdown and India’s big win

The impact of the global macro-economic environment, with China’s growing tensions with the United States and slowdown in venture capital investment likely diverting benefits to the Indian startup ecosystem.

“There is some sort of decoupling happening between US tech companies and Chinese tech companies. Recently Google pulled its apps and services from Huawei’s new devices.”

According to industry observers, a sense of saturation is seen in the Chinese market. The prospects are therefore brighter for a country like India that is on the cusp of a digital makeover and offers a plethora of related opportunities for investors across segments.
Until now, Chinese investors like Tencent, Alibaba and its affiliate Ant Financial, and Shunwei Capital, among other prominent names, have made investments in Indian startups like Paytm, Ola, Swiggy, Zomato, BigBasket, Meesho, etc.

India’s Fintech Boost

India recorded 23 fintech deals during the second quarter of 2019, compared to China’s 15.The areas that fintech covers globally includes payments, insurance, lending, personal finance, wealth management, and blockchain/ cryptocurrency.

• Data from CB insights’ latest Global Fintech shows that India’s fintech enterprises raised $286 million compared to China’s $192 million. Funding for fintech startups declined 89% quarter-on-quarter in China due to tighter regulations imposed by the countries central bank.
• Indian startups deals include RazorPay, which raised $75 million in June led by Sequoia and Ribbit Capital, and digital insurance startup Acko, which raised $65 million from investors such as Flipkart co-founder Binny Bansal and SAIF Partners.

A long way to go…

However, seen from a larger and long-term perspective, India still lags behind China in the birthing of unicorn companies.
One of the biggest gaps we see is the availability of early-stage funding. Only 30% Indian startups with early stage funding secure Series A investments, which stands at about 50% in US and China. Right from seed stage to Series A is where countries like China and the US stand out as they have a lot of high-risk capital available.

“With India becoming the world’s fastest growing startup ecosystem, it begs to differ that the race has just begun and India hasn’t even scratched the surface of its potential yet.”