By Shruti Aggarwal, Co-Founder, StashFin
India has emerged as the 3rd largest ecosystem for start-ups globally, after displacing the United Kingdom, with over 61,400 DPIIT-recognized start-ups across 636 districts of the country as of 10th January 2022. The United States of America tops the list with 396 unicorns, while China is at the second spot with 277, according to the data from Hurun Research Institute. Alongside India, these top three countries have not shown any signs of slowing down. As of today, currently, India has 83 unicorns with a total valuation of $ 277.77 billion.
What is a Unicorn?
A unicorn is a privately held start-up company, which is valued at over $1 billion. The term was first coined by a venture capitalist and a seed investor, Aileen Lee in 2013.
The Pandemic Trigger
Across the world, the pandemic accelerated the work from home model, with entire industries switching to digital. It was the same with India. However, a blooming digital payments ecosystem, increased smartphone user base and digital-first business models are the three main factors that have attracted investors. Tech-based companies have become household brands that are contributing to the unicorn boom in India. Due to a large number of smartphone penetration and digitization of commerce in every aspect of life, industries such as – EdTech, FinTech, e-commerce platforms, healthcare, SaaS are contributing extensively to the unicorn ecosystem.
State of Unicorns in India
The year 2021 saw the birth of 44 Indian unicorns. This sort of a revolution with $106-billion worth of value-creation by these unicorns has in turn resulted in creating 1.4 million direct and indirect jobs.
Despite the socio-economic suffering caused by the pandemic in its different stages and variants, it didn’t prove to be a cog in the wheel for Indian entrepreneurs. In fact, their resilience and tireless efforts not only contributed to the economy, but they also provided for COVID-19 relief efforts.
An encouraging aspect has been the rise of the female entrepreneur, who have contributed immensely to the start-up ecosystem. Out of the 44 unicorns, 13 were founded by women. This may be perceived as a significant progress of Entrepreneurship in India.
There also has been a shift in the traditional way of funding, wherein start-ups are now looking at exercising alternate routes such as crowdfunding, revenue-based financing, venture debt, digital loans, and lending platforms, etc.
Way Forward for Unicorns and Entrepreneurship
The regulators and policy makers must play a more proactive role in formulating appropriate regulations that encourage innovation and support emerging business models. There has to be a legislative framework to address specific parts of every vertical. Moreover, levies on investments and capital gains by investors, tax reforms will not only ease the burden, but it will encourage more venture capitalists to invest more in start-ups.
Beyond the Unicorn Stage
The global start-up ecosystem is witnessing a shift as the world is increasingly realising the potential of start-ups. There can be a major disruption in the ecosystem if the government encourages innovations, emerging business models and easing up on tax reforms and levies on investment. This will further motivate more funding and we can see more start-ups entering the unicorn ecosystem. Gradually, we can transition from the age of unicorns to the age of decacorns, which have a valuation of more than $ 10 Bn.
The more there are companies in the Unicorn and Decacorn cohort, the more there will be jobs and entrepreneurs, which will only boost the economy.