Within the first 4 months of 2021, 11 corporations have attained unicorn standing, that means they’ve reached a valuation of not less than $1 billion, based on knowledge platform Tracxn. 5 startups hit that milestone in April alone. By comparability, there have been 13 in all of 2020, and 10 in 2019. The ranks of India’s tremendous rich tech leaders are swelling quickly because of this.
Not solely are extra corporations amassing this sort of cash than ever, however they’re additionally doing so at a record-breaking clip. And a few of India’s most profitable startups — together with Flipkart and Zomato — are reportedly exploring potential listings this yr. Zomato declined to remark and Flipkart didn’t reply.
“It’s nice that Indian startups are going by means of this funding growth. However they might want to discover sustainable enterprise fashions, which make some huge cash, to be able to survive,” stated Radhika Gupta, CEO of Edelweiss Asset Administration Restricted. “Even a Google or an Amazon can’t survive on buyer numbers alone.”
First, the excellent news
The pandemic, in the meantime, has inspired individuals outdoors of main cities to spend cash on-line, rushing up digitization of companies and opening up extra alternatives for expertise entrepreneurs.
The enterprise capital agency additionally discovered that the time it takes for a tech startup to succeed in a $1 billion valuation has shrunk dramatically, from almost 15 years in 2005 to 2.four years in 2016 and 2017.
Danger of bloat
Some consultants, although, have began questioning how a lot cash massive funding corporations are pouring into the sector.
“They over-capitalize the corporate by giving 1.5 occasions or 2 occasions the quantity wanted,” stated Amit Ranjan, co-founder of presentation-sharing service SlideShare. He is now working with the Indian authorities on a digital locker venture known as DigiLocker.
“There isn’t any justification for this besides to bludgeon the competitors,” Ranjan advised CNN Enterprise.
However Rehan Yar Khan, managing accomplice at Orios Enterprise Companions, would not see the inflow of cash as a “massive fear.” In spite of everything, corporations nonetheless want large quantities of capital to seize the potential of India’s huge market.
He cited PharmEasy, a web based pharmacy agency, for instance. Khan was an early investor within the agency, which grew to become a unicorn earlier this yr.
“E-pharmacies have lined solely three% of India’s market,” Khan stated. “… So naturally they want extra money to develop.”
However there are different complications to contemplate, too. What occurs if a unicorn turns into over-funded and fizzles earlier than it has an exit plan?
Solely a handful of Indian tech corporations have held listings over the the final twenty years. And no tech startup value greater than $1 billion has gone public.
“By inflating valuations within the personal market, you’re suspending your capacity to enter the general public market,” stated Karthik Reddy, co-founder of enterprise capital agency Blume Ventures. He believes that Indian corporations have to consider preliminary public choices sooner reasonably than later to be able to construct a sustainable startup ecosystem.
“We do not have massive tech acquirers, so you possibly can’t await a Walmart to come back and purchase your largest asset each time,” he added.
May this be the yr?
There are murmurs in Indian tech circles about large upcoming exits. Reddy is optimistic that 2021 could also be remembered not only for its funding growth, but in addition for bringing a few cultural shift within the trade.
“India must unleash its tech corporations on the general public market,” he stated. “Proper now Indian residents have hardly any publicity to the unicorn growth.”