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UNICORN SPOTTED: The Surge in Unicorns in India Explained

India added 11 new unicorns in 2021. Know how 6 startups became Unicorns in India in a week

India was once considered a very difficult nation for a company to commence business operations because of the stringent restrictions and unfriendly laws for investors. But in the last 2 decades, India has seen a flood of billion-dollar companies, with many in upcoming sectors like finance and education technology. Today it is a heaven for firms who want to be Unicorns in India.

Nearly 67 of the 100 unicorns in India came after 2005, said a Credit Suisse report earlier this month. Unicorns are unlisted firms having a valuation that exceeds 1 billion US Dollars. On the other hand, of the 336 firms with valuations exceeding $1 billion, on the BSE500 list, only 13 percent were started after 2000.

In this month alone, 6 startups have joined the coveted club of unicorns in India. The latest entrants to the club are Gupshup and Mohalla Tech is on Thursday joined Groww, Meesho, Cred and PharmEasy’s parent firm to raise their valuation to more than $1 billion. While Sharechat has existed since 2016, its short video platform — Moj — is less than a year old. Moj was launched less than two days after the government banned the Chinese short video platform TikTok last year. On the other hand, Gupshup provides its application programming interface to businesses for customer engagement across communication channels. This includes providing chatbots, bot-building tools, omnichannel inbox capabilities, conversational AI, and client-side software to manage communications.

Read more: Cryptocurrency ban in India: A trillion-dollar loss

(this data is till April 7)

A total of 11 firms have already become unicorns in India. Compared to this there were only 9 additions to the club in 2020 and 2019 each. So why is the list growing at such a pace?

Analysts say that a positive outlook towards public listings, surplus dry powder with venture capital firms, and a strong equity market performance are giving investors confidence to make the risky bets. The COVID-19 pandemic has made digital acceleration happen all over the world and especially in India. That is the reason why most of the companies that became unicorns in 2021 are technology companies.

Further, the report by Credit Suisse said that “Till 2005 less than 15% of Indians had a phone, versus 85% now; 700 mn-plus people have internet access now due to cheap data and falling smartphone prices,”. This increase in teledensity and smartphone and internet penetration further helped the space. Payment companies like Paytm and PhonePe can get millions of customers as digital payments have taken off, especially after the viral outbreak.

A surge in foreign private equity addressed the shortage of risk capital that was plaguing the capital investment market. This has happened because India is the largest consumer market still open in most sectors. The US and China consumer markets have become highly mature and are now mostly dominated by large players. Increasing financial innovation, improvement in physical infrastructure like road connectivity, and development of ecosystems in several sectors are also contributing to the surge in companies entering the unicorn list.

“The largely expected e-commerce, education technology, food-tech and mobility companies account for less than a fourth of the total. The largest number of firms are in finance (all non-banks), which includes a few conventional NBFCs (non-banking finance companies) in addition to the highly disruptive financial technology (FinTech) companies: given the unique position India is in (low financialization and at the same time world-leading financial infrastructure),” the Credit Suisse report said.

This is a great time to be an entrepreneur in India, especially if you have a technological product at your hands. The already growing capital market for startups just got a huge boost due to the COVID-19 pandemic. The experts are confident that this high should last for at least a decade as there is plenty of room for India to grow as a consumer market.

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