TheNFAPost Podcast

India’s tech industry has seen a new historic week with six new unicorns emerging in the space of just four days. The country has given birth to six new startups whose valuation has crossed $1 billion (entitling them the unicorn status), riding on the new wave of venture capitalists showing immense interest in Indian startups.

The size of these unicorns is determined by their current valuation status in the following order: The investment platform Groww is valued at more than $1 billion, messaging bots startup Gupshup hit $1.4 billion, digital pharmacy API Holdings Pvt. was valued at close to $1.5 billion, app developer Mohalla Tech surpassed $2.1 billion, social commerce startup Meesho Inc. also hit $2.1 billion and financial-technology provider Cred topped the list of unicorns at $2.2 billion.

Riding on the nation’s explosive growth of internet services coupled with the rapid adoption of smartphones and rising new gen of ambitious entreprenuers, India’s ecosystem is ideal for the venture capital-backed startup culture.

“Large funds such as Naspers, SoftBank and Tiger Global have significant amounts of capital to invest and these startups are now on top of their list,” said P.N. Sudarshan, a partner at Deloitte.

Despite India’s total valuation of startup deals in 2020 reaching $11.8 billion, the country trails well behind the US and China in the net worth of VC money invested in local startups. In contrast, US is valued at $143 billion while China’s valuation stands at $83 billion, according to researcher Preqin.

Some of the leading startups like digital payments giant Paytm and Online-education startup Byju’s have been successful in attracting significant amounts of investments from VCs. As Bloomberg News reports, the former has attained a valuation of $16 billion which makes it the most valuable startup asset in the country, followed by Byju’s at $15 billion.

Walmart-owned Flipkart is evaluated at more than $35 billion and expected to kick-off an IPO in Q4 this year. Meanwhile, a Credit Suisse Group AG report last month found there are about 100 unicorns in India with a combined market value of $240 billion, in sectors from e-commerce and fintech to education, logistics and food-delivery.

“India’s corporate landscape is undergoing a radical change due to a remarkable confluence of changes in the funding, regulatory and business environment in the country over the past two decades,” the report said. “An unprecedented pace of new-company formation and innovation in a variety of sectors has meant a surge in the number of highly-valued, as-yet unlisted companies.”

The early adoption of online tecnologies in India amid the ensuing Covid-19 pandemic and lockdowns, has led to the birth of 1,600 new startups and thereby taking the tally to 12,500 in total. These stats have been confirmed by Nasscom in its January report.

“The surge of funding and the breeding of unicorns is not a surprise because India has the third-largest startup ecosystem in the world and the third-largest market for such startups,” said Pranav Pai, managing partner at 3one4 Capital Advisors LLP.

The report adds that 55 of these are potential unicorns or soonicorns, which will be formed in the coming months. The startup valuations have jumped from a meagre $20 million just 5 years ago to more tan $100 million to $200 million rounds these days.

“The difference is, instead of encountering just one high-quality startup among those, we now see eight to 10 every month,” said the venture capitalist who earlier funded Arin Capital backed edtech startup Byju’s and the newly-minted e-pharmacy unicorn, PharmEasy.

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