Journey to the Unicorn Club: India’s Path to Startup Success
India homes around 113 startups and remains the third highest producer of unicorns in the world
India is now home to 113 unicorns with a combined valuation of more than $350 Bn. Overall, Indian startups raised $10 Bn+ in 2023, according to Inc42’s Indian Tech Startup Funding Report 2023. However, only two new unicorns were seen in the past year, marking the lowest number of unicorns in a calendar year after 2017.
The Effect of Funding Winters:
Indian start-ups have been on a roller coaster ride in the last few years. They experienced a sharp funding peak during FY22 totalling $50 billion, but then a so-called funding winter over the subsequent quarters led to a 70 per cent drop in FY23 to $15 billion. The increasing cost of capital, rising interest rates, recession in developed markets, a decline in the value of technology stocks, and the slowdown in consumer internet growth have all been challenges for sustained funding. Consequently, start-ups are now focusing on expediting their path to profitability and reducing burn rates.
Anticipation for 2024:
India is anticipated to achieve stronger-than-anticipated GDP growth in the ongoing financial year. Notably, GDP expanded by 7.6% in Q2 FY24 (July-September 2023), exceeding the RBI’s projection of 6.5%. The central bank’s economic activity index indicates an estimated growth of at least 7% for Q3. In 2015, India was home to just 10 unicorns, but this number grew more than 11x in less than a decade. 2024 witnessed its first unicorn at the beginning of the year sparking a hope that this year might see a plunge in Unicorns compared to 2023.
India holds the third position globally regarding the number of startup unicorns. Since the emergence of the first unicorn in 2011, India has witnessed the creation of over 110 unicorns. Notably, more than 60% of these unicorns achieved their status in the past three years, indicating a significant acceleration in the sector during this period.
Geo-mapping of Indian Startups and their states:
Maharashtra produced the most unicorn founders (40) who were either born in the state or have their hometown there. Delhi, the national capital, comes second with 36 founders. Uttar Pradesh, Rajasthan and Tamil Nadu round off the list of top 5 states with the most number of unicorn founders. The top 5 states cover more than 55% of the population in India. Madhya Pradesh, Punjab, Gujarat, and Telangana were next on the list with 13, 11, 11, and 9 unicorn founders respectively while Haryana, West Bengal and Karnataka shared the same number of unicorn founders for the 10th spot. Chandigarh, a union territory and the capital city of Haryana and Punjab, produced as many as 7 unicorn founders, harking back to the spirit of entrepreneurship that Punjab was known for till the lost decades post-1990. Notably, around 40% of Indian unicorns are headquartered in Bengaluru. So far, there are no unicorn founders from Kashmir, or the smaller states including Himachal Pradesh, Sikkim, Goa, and northeast states like Manipur, Arunachal Pradesh, Mizoram, Meghalaya and Tripura.
Institutes and Startups:
When it comes to institutions, out of 262 founders of unicorns, 116 (44%) come from IIT. IIT-Delhi leads the chart with 34 founders followed by IIT-Bombay and IIT-Kanpur with 29 and 16 founders respectively.
In terms of master’s degrees, the IIM brand is on top with 46 founders (17.5%) comprising 21 from IIM Ahmedabad, 9 from IIM Bangalore, and 7 from IIM Lucknow. Besides IIT and IIM, 10 unicorn founders have completed their degree from BITS Pilani, 10 have their degree from the Indian School of Business while 42 founders have pursued their degrees from foreign institutions/universities such as New York University, London School of Business, Harvard Business School, Stanford University, and Insead, among others.
India’s unicorn landscape is poised for further transformation as a new wave of startups is on the brink of achieving unicorn status. Dubbed “soonicorns” for their imminent ascent, approximately half a dozen startups have already surpassed the $800 million valuation threshold.
According to a report by Entrackr, roughly 20% of Indian unicorns are headquartered overseas, often due to tax considerations or favourable business environments. Additionally, proximity to key markets plays a significant role in this decision for some companies. However, there’s a growing trend of startups relocating their operations to India.
Women in startup:
Despite these developments, the representation of women in India’s unicorn ecosystem remains disproportionately low. Out of 262 unicorn founders, only 17, or 6.48%, are women. Efforts to address this gender disparity are crucial for fostering a more inclusive and diverse startup ecosystem in the country.
