A Detailed Look at Unicorns and the Indian Unicorn Ecosystem – Research & Ranking

Unicorns are mythical beings found in many ancient cultures such as Indian, Chinese and Mesopotamian (ancient Iraq), with different names. A Unicorn is a horse with a horn on its forehead. In ancient cultures, it symbolized purity, rarity, grace and was supposed to be a protector from evil and diseases.

Switch to the modern era, Unicorns are no longer mythical beings but real companies, tangible businesses and concrete ideas, hungry for growth capital. In business parlance, Unicorn is defined as a company with valuation more than $1bn. At current USDINR exchange rate of ~Rs. 73, this works out to Rs. 7,300cr.

The word “Unicorn” was coined by a venture capitalist Aileen Lee in 2013, to describe a very rare breed of companies. Just like Unicorns in mythology, these companies were thought to be extremely rare, almost improbable, but not impossible. When Ms. Lee coined the word, there were less than 40 Unicorns. However, come 2021 and we have a new Unicorn born every three days!

Let\’s take a look at this exciting tribe of companies, which have become very glamorous over the past few years. And proudly, India is among the top countries giving birth to Unicorns consistently year after year. There is a lot that Unicorns have to offer to the economy and the eco-system. We shall take a look at all these aspects one by one.

In this article let’s take a look at different aspects of Unicorns such as:

1. Introduction to Unicorns:-

We define what are unicorns, which are the major countries/regions where these are setting up. We also look at why unicorns generate so much interest among investors and general public.

1. The Indian Unicorn eco-system:-

We look at the Indian Unicorn eco-system in numbers. We see how they are classified by – year, sector, city, profession, etc. What value have these companies created for India? Also what support has the Indian Government offered by way of creating a conducive environment?

1. The Global Unicorn eco-system:-

We look at global Unicorns and divide them by country. USA, China, India and UK are world leaders here. There’s also an interesting breed of unicorns that we take a look at – Global unicorns founded by Indians. Lastly, we look at Government support lent to start-ups in China and USA.

1. A look at Unicorns in India and globally:-

We take a look at some exciting Unicorns in India and abroad that have introduced newer ways of doing business, addressed a current niche and given existing well-entrenched players a run for their money.

1. Unicorns – Benefits to the economy and the eco-system:-

Unicorns are not just capital guzzling entities that have been glamorized by the press. They also create real value for investors, eco-system and the economy. From generating employment, to receiving multiple rounds of investments, to creating a ripple effect across sectors; these once-tiny entities are exploding at a breath-taking rate. We look at what the future has in store for Unicorns and whether they can become new avenues for wealth creation going ahead.

While we write tomorrow’s exciting story, we leave you with some quotes from prominent Unicorn founders:

	“Being a unicorn means you are at a certain valuation. But a start-up can have value only if it has profits. A Unicorn status in itself is ephemeral”   Yashish Dahiya, Co-Founder and CEO, Policybazaar
“Why would I create something if not to promote it”   Larry Kim, CEO, mobile Monkey
	“When I started SpaceX I thought that the most likely outcome was failure. And I think to have any other expectation would have been irrational”   Elon Musk, Founder, CEO and Chief Engineer, SpaceX
\”If we tried to think of a good idea, we wouldn\’t have been able to think of a good idea at all. You just need to have a solution for a problem in your own life.\”   Brian Chesky, Co-Founder & CEO, AirBnB
	“I had done 20,000 hours of work in this industry before even starting something. That had given me an edge over those just understand it theoretically”   Nithin Kamath, Founder & CEO, Zerodha

Never stop believing in Unicorns

You never know when you might come across one

As legends have it, Unicorns in mythology possessed magical abilities to cure sickness and were an antidote for poison. Some legends also suggest that Unicorns were used by the ancient wealthy to protect themselves against attacks or extend their lifespan.

Modern day Unicorns might not be able to pull off all this magic, but just like ancient ones, even modern Unicorns are the subject of a lot of curiosity, admiration and intrigue. From less than 40 Unicorns in 2013 to 654 Unicorns globally (as per CB Insights), the animal has evolved a lot!

As seen in the chart below, Unicorns took off after 2018 and the current year (CY2021) has seen 125 Unicorns getting created in five months. The swift emergence of Unicorns has been due to greater smartphone adoption and cheaper cloud computing.

The most popular sectors where Unicorns have come up are:

• Fintech,
• E-Commerce and Market-place
• Artificial Intelligence and Robotics

No. of Unicorns added globally per year have seen a spurt since 2018

Source: CB Insights data as on May, 2021. All year mentioned above are calendar years

USA and China have spawned a disproportionate amount of Unicorns. USA was the dominant place for origination of Unicorns till 2013, while China stepped up on the gas post 2014. UK and India have followed USA and China in terms of number of Unicorns incubated.

USA and China are the major Unicorn destinations, followed by India and UK

Proportion of Unicorns spawned by country since 2010 – 654 in all

Source: CB Insights

Why Unicorns generate so much interest?

Unicorn companies have been the subject of interest for investors, promoters and media for a long time. The term “Unicorn” has become a “cool” word. Every start-up promoter dreams of achieving “Unicorn” status for his/her company few years down the line. The term has become so popular due to the following reasons:

Elusive:

Despite hearing, reading about them all the time, the truth is that Unicorns are a rare breed. According to various studies, only 0.7% – 1.2% of all start-ups have a chance of achieving Unicorn status. That means, for every 1,000 start-ups, only between 7 and 13 will ever achieve the coveted title.

Backing by stalwarts:

Several start-ups are backed by the biggest business personalities or celebrities, from an early stage. The table below shows some examples of start-ups that were backed by famous cricket, Bollywood and business personalities from an early stage. If your favorite actor/cricketer is backing a company, it is sure to generate a lot of interest. Also, if Ratan Tata or Narayana Murthy are backing some start-up, investors and lenders are sure to sit and take notice.

Start-up	Business	Celebrity Investor
Digit Insurance	Non-Life insurance	Virat Kohli
Khatabook	Digital Ledger App	MS Dhoni
Nykaa	Beauty and Skin Care	Katrina Kaif
Spice Money	Rural FinTech	Spice Money
Bluestone	Online Jewellery Retail	Ratan Tata
Hector Beverages	Non-alcoholic beverages	Narayana Murthy

Explosive growth – Any takers for a 75% CAGR growth?

There was an interesting study done in June, 2020 by Charles Plant of Narwhal Project, a technology research company. In that study, Charles states that a Unicorn grows at a Compounded Annual Growth Rate of 75% for first ten years. The calculation for this metric is as follows:

Metric	Value
Unicorn Valuation (by definition) – A	USD 1bn
Median Value of Capital Multiple (Based on research by Narwhal Project) – B	4.7xs
Capital needed to become Unicorn – A / B = C	USD 212mn
Ratio of capital to revenue – D	1.7xs
Revenue scale after ten years – C / D = E	USD 125mn
Resultant CAGR	75%

Note that Capital multiple is the ratio of valuation divided by capital raised. Ratio of capital to revenue (D above) implies the amount of capital raised by companies for every dollar of revenue earned. Based on research by Narwhal, it works out to 1.7xs.

Given the explosive growth start-ups (statistically) exhibit, such companies generate a lot of excitement, interest and media attention.

 

Disruptive ideas that shake up existing ways of doing business:

Start-ups (potential Unicorns) seek to address a particular need of their target consumers. It makes little sense for a fledgling company to enter an already crowded sector and try to make room for itself. Existing biggies will soon steamroll the company. Hence, newer companies mostly try to address a niche and specialize in it. Sometimes they establish a new way of doing the existing business. Some examples are stated below:

Start-Up	Niche
AirBnB / Oyo	A new way of booking hotel rooms
Uber / Ola	Revolutionized shared mobility space without owning any fleet
Zomato / Swiggy	A new way of obtaining hotel food at home
Netflix / Zee5	Offered option of \”on-demand\” content consumption for a fee

Thus, we can proudly say that India is among the major countries where Unicorns are found. Now let\’s examine what India’s Unicorn eco-system looks like. Which sector generates the largest number of Unicorns? Which city can be called India’s “Unicorn factory”? We shall also examine the kind of employment they have created, what valuations they have attracted. And most importantly, what support has Indian Government offered them?

A look at the Indian Unicorn Ecosystem

A proud fact for us Indians is that our country has produced the third largest number of Unicorns after the USA and China.

The Indian Unicorn List

There are different market research companies that put out slightly different data for the number of Unicorns in India. For our story, we have used India-specific data from Venture Intelligence. We have also used data from other sources, which we have mentioned. Take a look at different data points for Unicorns in India.

Following is a list of Top 50 Indian Unicorns as per website Venture Intelligence.

Vauations of Indian Unicorns in Context

According to a report by Credit Suisse, the total valuation of Indian Unicorns is $240bn. At an exchange rate of Rs. 73 per USD, this works out to Rs. 17,520bn. This value is roughly 15% of the Market Cap of NIFTY50 companies and 9% of the Market Cap of NIFTY 500.

Comparative numbers – Unicorn Valuation vs Indian indices Market Cap (Rs. Bn.)

Source: Data for Indian Unicorns as per Credit Suisse Report. (NIFTY 50 and NIFTY 500 MCap data sourced from Moneycontrol website as on closing of 24th May, 2021)

Indian Unicorns by Year

If we look at the year by year emergence of Unicorns, we find that post 2018, the trend has picked up a lot. Despite 2020 and 2021 being COVID-affected years, the trend was up. Some of the reasons for the same are:

 

1. Emerging entrepreneurs have leveraged changing consumer behavior, especially in the aftermath of COVID and positioned themselves to serve these needs
2. Marquee investors (Indian and global) have few places as potentially rewarding as India, given that stock markets are getting choppy and global yields are low.
3. India offers a potent combination of large addressable market size, technology innovation, ready talent pool at reasonable paychecks, etc.
4. According to data from Fortune India, 75% of FDI received over the past five years ($184bn out of $250bn) has come in through venture capital and private equity funding, which invests in the unlisted, startup, and growth companies, leading to the creation of unicorns.

 

According to a report by Nasscom-Zinnov, India is set to achieve 50 unicorns in 2021 and 100 in 2025.

Indian Unicorns by Sector

FinTech and Retail are the two sectors which attract the largest number of start-ups and hence Unicorns. Fintech has seen huge investments due to emphasis of Government on “less-cash” economy and Digitization, boosted by the demonetization drive and pushed further by COVID. Retail, too has aroused interest as entrepreneurs saw an opportunity in delivering essentials, non-essentials and other stuff to customers’ homes in the wake of the pandemic. Even before the pandemic, Millenials had plenty of technology access, sufficient money, but less time and lower propensity to visit shops.

Indian Unicorns by City

Bengaluru is the “Unicorn capital” of India, with a staggering 40% Unicorns originating from the “Tech-City”. This is followed by Gurgaon (14%), Mumbai (14%) and Noida (10%). If we add the three cities comprising of NCR – Gurgaon, Noida and Delhi, the number works out to be 30%, which is ahead of Mumbai.

• According to data from various sources, Unicorns have (directly and indirectly) created approximately 1.4mn jobs every year over the past ten years.
• Indian start-up Unicorns have generated $106bn in revenues for founders, investors, employees and the economy at large.
• Companies such as Swiggy, Zomato, apart from several others have provided a secondary source of income to people who already have jobs/businesses.
• Unicorns leverage technology for majority of their operations. Hence, hiring is mainly for sales and business development.
• According to recruiter Xpheno, there is a relation between funding received by a company and hiring done by them.
• One important factor about the Unicorns is the indirect hires they create. Over the past decade, more than 1 mn jobs have been created in unskilled or semi-skilled profiles such as security guards, delivery personnel, handlers, etc.

A Look at the Newest Entrants in the Indian Unicorn Space

The year 2021 has been a blockbuster year for Unicorns. A total of 14 start-ups have reached Unicorn status in 2021. Following is the list:

Unicorn	Valuation ($bn)	Sector
Digit	1.9	Insurance
Innovaccer	1.3	Software
Infra.Market	1.0	Infrastructure
Five Star	1.4	Banking
Meesho	2.1	Social Commerce
Cred	2.2	FinTech
Pharmeasy	1.5	E-pharmacy
Groww	1.0	Stock Broking
ShareChat	2.1	Social Media
Gupshup	1.4	Enterprise Messaging
Chargebee	1.4	FinTech
Urban Company	2.0	Home Service
Moglix	1.0	B2B E-Commerce
Zeta	1.5	Neobanking

Source: Economic Times

Indian Unicorns and the funding they have recieved till date

Following is a list of Unicorns and the funding they have received before and after achieving Unicorn status.

Source: 2startups

• According to 2startups, an indicator of quality of a Unicorn is how much money it raises to reach $1bn valuation. Lesser the capital needed to reach $1bn, better is its capital allocation strategy and hence better the quality of the Unicorn.
• While valuations are important, Unicorns have often attracted criticism for being cash burning machines. ShopClues, Snapdeal and Quikr saw their valuations fall to extremely low levels, despite receiving investments.
• Unicorns often continue to burn cash relentlessly for several years in their pursuit for market share and top-line growth. Consumer firms often fall prey to this situation.
• Todays’ investors would want to exit at some future date. They should be able to get good returns for their investments, while the new entrants should still see potential for future growth in the company.

Who is putting the money most aggresively in Indian Unicorns?

Softbank has been most aggressive while investing in Indian Unicorns, followed by Alibaba and Tiger Global.

Top Investors into Indian Unicorns

Investor No. of Unicorns funded Softbank (Japan) 9 Alibaba Group (China) 5 Tiger Global Management (USA) 5 Sequoia (USA) 4 DST Global (China) 3 Tencent (China) 3 General Atlantic (USA) 3 Temasek Holdings (Singapore) 3

Source: Hurun Research Institute

There is also an interesting breed of Unicorns that are not located in India but have been started by Indian-origin entrepreneurs:

Rank	Company Name	Valuation US$bn	Country	City	Core Competence Main Sector
1	Robinhood	8.5	USA	Menlo Park	FinTech
1	Instacart	8.0	USA	San Francisco	On-Demand Delivery
3	Roivant Sciences	7.0	Switzerland	Basel	Biotech
3	Automation Anywhere	7.0	USA	San Jose	Artificial Intelligence
5	Samsara Networks	6.5	USA	San Francisco	IoT
6	Ginkgo BioWorks	4.0	USA	Boston	Biotech
7	Freshworks	3.5	USA	San Bruno	Enterprise Services
8	OakNorth	3.0	UK	London	FinTech
8	Rubrik	3.0	USA	San Francisco	SaaS
8	Netskope	3.0	USA	Santa Clara	SaaS
11	Confluent	2.5	USA	Palo Alto	SaaS
12	Improbable	2.0	UK	London	Gaming
12	Sprinklr	2.0	USA	New York	SaaS
12	Carta	2.0	USA	Palo Alto	FinTech
12	Nextdoor	2.0	USA	San Francisco	Social Media
12	Udemy	2.0	USA	San Francisco	EdTech
12	Zenefits	2.0	USA	San Francisco	SaaS
12	ThoughtSpot	2.0	USA	Sunnyvale	Artificial Intelligence
12	Postman	2.0	USA	San Francisco	SaaS
20	RigUp	1.9	USA	Austin	E-commerce
20	Scopely	1.9	USA	Culver City	Gaming
22	QuantumScape	1.8	USA	San Jose	New Energy
23	Poshmark	1.3	USA	Redwood City	E-commerce
24	Headspin	1.2	USA	Palo Alto	SaaS
25	Omio	1.0	Germany	Berlin	E-commerce
25	Icertis	1.0	USA	Bellevue	SaaS
25	ChargePoint	1.0	USA	Campbell	New Energy
25	Tresata	1.0	USA	Charlotte	Big Data
25	HighRadius	1.0	USA	Houston	Artificial Intelligence
25	ClassPass	1.0	USA	New York	Fitness
25	Knotel	1.0	USA	New York	Shared Economy
25	MoneyLion	1.0	USA	New York	FinTech
25	Pendo	1.0	USA	Raleigh	SaaS
25	Farmers Business Network	1.0	USA	San Carlos	E-commerce
25	Clover Health	1.0	USA	San Francisco	Artificial Intelligence
25	Instabase	1.0	USA	San Francisco	SaaS
25	Cohesity	1.0	USA	San Jose	SaaS
25	Druva	1.0	USA	Sunnyvale	SaaS
25	o9 Solutions	1.0	USA	Texas	Artificial Intelligence
25	Actifio	1.0	USA	Waltham	SaaS

Source: Hurun Research Institute

No private sector initiatives can become successful without active support of the Government. The Indian Government has taken several steps and initiatives to create a favorable atmosphere for incubating start-ups.

• Start-up India: The Start-up India initiative launched by Government of India in January, 2016 has recognized 49,606 start-ups till date. The initiative provides benefits to start-ups with respect to
  • Self-certification
  • Tax exemption
  • Easy winding up
  • Patent application and IPR protection
  • Funding through SIDBI

 

• Fund of Funds for Startups: Fund of Funds is a multi-manager investment fund that helps the startups by reducing the risk of investing in bonds, stocks and other types of securities. DPIIT has targeted to release Rs.100bn for Startups through SEBI registered Alternative Investment Funds (AIF) for the scheme.

• Budget 2021 Initiatives:
  • Extension of capital gains tax exemption for investment in eligible start-ups by one year
  • Extension of 100% tax rebate on profits (tax holiday) made from investments in start-ups by one year
  • Eligibility for MSMEs extended from Rs. 50L paid up capital and Rs. 2cr turnover to Rs. 2cr paid up capital and Rs. 20cr turnover.

The Indian Unicorn eco-system is red-hot with companies looking to make it big. Entrepreneurs are willing to take bigger risks than before, the business opportunity is huge due to India’s billion plus population and investors are willing to loosen their purse strings as there are little opportunities elsewhere. So it’s a win-win situation for everyone so far.

The Global Unicorn Ecosystem

Now let\’s take a look at the global Unicorn ecosystem. 

Globally, Unicorns have been spawned by numerous countries. According to data from CB Insights, there are currently 654 Unicorns belonging to 35 different countries. However, four countries have been at the forefront – the USA, China, India, and the UK. These four countries have contributed 82% to the world’s Unicorns since 2010. USA continues to be the biggest contributor, though China has been giving it a tough time since 2015.

Country-wise proportion of Unicorns since 2010 – The “Big 4”

Largest 20 Unicorns Globally

Company Valuation ($B) Country Bytedance $140 China Stripe $95 United States SpaceX $74 United States Didi Chuxing $62 China Instacart $39 United States Klarna $31 Sweden Epic Games $29 United States Databricks $28 United States Rivian $28 United States Nubank $25 Brazil One97 Communications $16 India Yuanfudao $16 China DJI Innovations $15 China Canva $15 Australia SHEIN $15 China Checkout.com $15 United Kingdom Chime $15 United States Grab $14 Singapore Plaid Technologies $13 United States BYJU\’s $13 India

Source: CB Insights. Please note that a valuation is an evolving number. The above is an indicative list

 

Monthwise Funding for Unicorns

Unicorns have been flourishing globally due to changes in customer behavior from COVID-related disruptions, swift technology adaption by companies, and very importantly, low-cost fund availability. If we look at global funding data since 2019 (Pre-COVID), we find that start-up funding has only become stronger since the pandemic.

Global start-up funding has taken off in 2021 ($bn)

Source: Crunchbase. Please note that the above data includes seed, venture, and PE for venture-backed companies

Subsequently, the global Unicorn count has also jumped up in 2021.

Which sectors are Unicorn-magnets?

Globally, FinTech is the largest sector from which Unicorns are formed. This is followed by Internet Software & Services and E-Commerce & Retail. China has gone a step ahead and produced a Hectacorn (a company with a valuation >$100bn). The company Bytedance, the owner of the recently banned TikTok and Helo, among other companies, commands a valuation of $140bn, according to data from CB Insights. USA-based payments platform Stripe and Elon Musk led technology company, SpaceX are closing in on its heels.

GOVERNMENT – THE BIGGEST ENABLER

As mentioned in our story earlier, the USA and China are the countries with the largest number of Unicorns in the world (India is #3 on the list, ahead of the UK). It’s pretty clear that for a country to produce Unicorns, their respective Governments have to provide the necessary support. Let us look at the same:

USA

1. Small Business Innovation Research Program – A program that encourages domestic small businesses to engage in Federal Research/Research and Development (R/R&D) with the potential for commercialization.
2. Small Business Technology Transfer Program – Competitive grant program that expands funding opportunities for innovative research and development for federal agencies.
3. Economic Development Administration — A U.S. Department of Commerce agency that offers grants, resources, and technical assistance to encourage entrepreneurship and innovation.
4. State Business Incentives Database — National database for economic developers, business development finance professionals, and economic researchers.
5. Small Business Development Centers — Provides support for small businesses and aspiring entrepreneurs throughout the U.S. by helping existing businesses remain competitive in a competitive market.
6. FedEx Small Business Grant — Provides a top prize of $50,000, along with funds towards print and business services.
7. Visa Everywhere Initiative — A global innovation program that encourages small businesses to solve payments and commerce challenges.
8. National Association of Self-Employed — An organization where self-employed people can apply for small business grants. One grant is awarded per month up to $4,000.
9. Eileen Fisher Women-Owned Business Grant — Awards a total of $100,000 in grant money to up to 10 female business owners each year.
10. The Amber Grant — Awarded once per month, the Amber Grant gives $10,000 funding to a female entrepreneur

China

Initiative	Details
Torch Program	Launched in 1988, the program aims to create the infrastructure necessary to support start-ups
Runs more than 1,500 incubators under the Ministry of Science and Technology
Has an innovation fund that has channelled 3.45bn yuan of investment into more than 3,000 projects in emerging industries.
Tech Parks and Incubation Zones	East Lake Hi-Tech Development Zone in the central city of Wuhan is home to at least half of the country’s incubation programs for optoelectronics start-ups
Incubators in the Shanghai Zhangjiang Hi-Tech Park focus on pharmaceutical and health care companies
Private sector Incubator	Microsoft Ventures — a start-up initiative providing guidance and funding with a focus on cloud-computing firms.
Chinaccelerator — An incubator backed by SOSventures, a capital fund with US$235 million under management, offers a three-month program twice a year.
InnoSpring — Silicon Valley-based China-focused incubator which looks to help Chinese firms expand into the US market

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