More unicorns focused on profitability now than just burning cash as funding winter sets in

• More unicorn startups are starting to turn a profit rather than just burning cash, with Molbio Diagnostics topping the charts with a profit of $46.8 million.
  
• The onset of funding winter has pushed more startups to generate profits instead of just burning cash – 17% of 2022’s unicorns are profitable, while the overall average for all unicorns till date stands at 15%.
  
• The newly-minted unicorns of 2022 also account for over a third of the total net profit reported by all the 13 profitable unicorns.
  

More unicorns are starting to turn a profit rather than just burning cash, according to a new report by startup and private companies’ tracker Tracxn. According to the report, four out of the 23 startups which turned unicorns in 2022 are profitable, which is a strike rate of over 17%.

Overall, there are about 13 profitable unicorns in India, says Tracxn, based on their last financial reports. According to a$4 by PwC, there were a total of 85 active startups in India at the end of 2022. This means only 15% of the total unicorn startups are profitable.

The most profitable amongst these unicorns is Molbio Diagnostics, a company founded in 2012. It is a provider of nucleic acid tests for infectious diseases. With a net profit of $46.8 million, it accounted for over a quarter of the total profit reported by the 13 unicorns in the list.

Molbio Diagnostics turned a unicorn in 2022. The three other startups which turned unicorns in 2022 and are also profitable are PhysicsWallah, Oxyzo and Amagi.

PhysicsWallah is an app-based online tutoring platform, while Oxyzo is an online marketplace for business credit. Amagi is an ad-solutions provider based in Bengaluru.


Funding winter forces startups to focus on profitability

With funding being key to startups’ survival, the onset of funding winter in the startup world in India and beyond has forced startups to focus on profitability.

For instance, the four profitable unicorns of 2022 account for over a third of the total net profit reported by the 13 profitable unicorns of India.

According to data from Tracxn, these four unicorns reported a cumulative net profit of $64.1 million, while all the 13 profitable unicorns have reported a cumulative net profit of $181.82 million.


Overall, these 13 profitable unicorns are from diverse industries, including life sciences, edtech, fintech, retail, real estate and more.

Funding winter sets in India and beyond

Funding winter – wherein startup founders find it difficult to raise money – has set in not just in India, but other major economies like the US, UK and China, too.


Of the four countries, India saw the second biggest decline in total funds raised in 2022 when compared to 2021. Indian startups raised $35.6 billion funds in 2022 when compared to $53.7 billion in 2021, which is a decline of 34%. China saw the biggest decline at 55%, according to the Tracxn report.

On the other hand, the total deals in India declined 24%, the highest amongst the four countries.

Late-stage startup funding down 52% in 2022

Funds raised by late-stage startups witnessed a 52% decline in 2022, according to a PwC report. Reflecting the caution amongst investors when it comes to late-stage startups, the total number of deals also fell 18%, while the average ticket size per deal saw a decline of 40% in 2022.

Late-stage startups refers to those startups which have products and services in the market and are well-known. Early-stage startups are those which have a prototype or a service that has been tested as scalable.

Early-stage startups saw a 12% increase in funding to $2.8 billion in 2022 from $2.5 billion in 2021. The average ticket size per deal remained constant at $4 million in this period.

Amongst the top five sectors, fintech, edtech and direct-to-consumer witnessed a decline in funding, while the software-as-a-service sector witnessed an increase in 2022, making it the most-funded sector, according to PwC.

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