In the funding winter, only four companies turn unicorns in the June quarter

• Only 4 companies entered the billion dollar unicorn club in the April-June quarter of 2022.
• There were 13 companies that turned unicorns in the January to March quarter of 2022.
• The slowdown in the unicorn creation is directly proportional to the slowdown in funding activities.

The ongoing funding winter has already caused a slowdown in the unicorn creation trend of India. Only four companies entered the billion dollar unicorn club in the April-June quarter of 2022, compared to 13 in the preceding January-March quarter. India had added 12 unicorns in the comparable quarter last year.

A unicorn is a startup valued at over a billion dollars. About 44 startups achieved this milestone in 2021 and that number was expected to be bigger this year thanks to the optimism in the market. However, contrary to expectations, the April-June quarter saw the least number of unicorns being created since September 2020.

According to business intelligence firm Tracxn, the slowdown in the creation of unicorns is directly proportional to the slowdown in funding activities in the Indian startup ecosystem. The investors have limited capital to invest in startups, which makes them even more cautious about investing in bigger rounds or cash-burning businesses.

Neobanking firm Open Financial, software-as-a-service (SaaS) company LeadSquare, Nykaa competitor Purplle and edtech company PhysicsWallah were the four companies that turned unicorns in the April-June quarter of 2022.

Neha Singh, co-founder of Tracxn, emphasised that the entire slowdown in funding and unicorn creation has been impacted by the dip in later-stage funding rounds. The trend of low unicorn creation and late-stage funding is likely to continue throughout this calendar year, through to the March quarter of next year if the Russia-Ukraine war didn’t cool down, Neha added.

OneCard was the only unicorn of July 2022, hinting at the continued slowdown for this quarter as well.

VerSe Innovation — the parent company of Dailyhunt and Josh — raised the biggest funding round last month when it secured $805 million at a valuation of $5 billion. It was followed by Delhivery at $304 million, Udaan at $275 million, ShareChat at $255 million and upGrad at $225 million.

The slowdown in unicorn creation is not just limited to India, it coincides with a global downturn in funding. About 85 unicorns were added globally in the April to June quarter of 2022, compared to 129 in the same quarter last year. The number stood at 110 unicorns in the January to March quarter.

Meanwhile, the global startup funding in April-June quarter of 2022 dropped by 23% on a year-on-year basis to $108.5 billion.

Gaurav VK Singhvi, co-founder of investment firm We Founder Circle, explained that several startups had ignored their bottomline for a long time and the investors were now putting pressure on these companies to focus on their finances and numbers. “Revenue is all good but now they are looking at profitability and long term sustenance,” he added.

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