VCs say 10 unicorns in 4 months may seem too small by the end of this year

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VCs say 10 unicorns in 4 months may seem too small by the end of this year
Charting India's 10 unicorns in four monthsBusiness Insider India
  • India saw 10 unicorns emerge in the first four months of 2021 as compared to 11 unicorns from the whole of 2020.
  • Venture capitalists and money managers in India say that this number might seem pretty small by the end of the year.
  • India may soon see more than 100 technology startups as unicorns, much before the 2025 target.
India saw 10 unicorns emerge in the first four months of 2021 as compared to 11 unicorns from the whole of 2020. But the venture capitalists and money managers in India say that this number might seem pretty small by the end of the year.

India currently has over 40 technology startups that are unicorns. Even after the 10 strong unicorns that have cropped up already, there are many more in the line – home services startup Urban Company, neo-bank Zeta, are among the many companies that are currently raising funds over a billion dollar valuation.

Industry bodies like NASSCOM, TiE have been bullish about the Indian startup ecosystem’s growth and believe the country is set to hit 100 unicorns by 2025. But we will be getting there much sooner.

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“In the next couple of years, we should hit 100 unicorns,” Lathika Pai, country head, venture capital and private equity partnerships at Microsoft said in a conversation with Business Insider.

And Haresh Chawla, partner at True North is even more enthusiastic. He said “I believe we will do 3X of last year, so over 30 unicorns in this year alone.”

VCs are more than willing to bet on startups

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When the COVID-19 pandemic started, startups in India feared that VCs might hold on to their purses and think twice before investing. But with the digital acceleration and the boom of sectors like edtech, healthtech, fintech and more, all the fears have been kept away.

In the first quarter of 2021 alone, India has seen $11.85 billion in private equity and venture capital funding.

VCs say 10 unicorns in 4 months may seem too small by the end of this year
Venture Intelligence / Business Insider India / Flourish

Chawla believes that the COVID-19 pandemic has pushed the consumers’ willingness to pay and that distribution is no longer a challenge, which has brought in investor’s interest. “This has created a new landscape from 12 months ago. Many of these new companies at some level are going to profitably disrupt the market,” he said.
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Pai, who agrees that COVID-19 has been a boon to startups, gives us a snapshot of what’s happening in the VC zoom calls as they meet new companies. “It’s no longer vanity metrics that we are talking about, people are downloading, transacting. I know of a startup and the valuation they got right now was 20X from a year ago for their series A round. It’s phenomenal that the valuations have increased because the potential is now suddenly open more than ever,” she said.

The unicorn rush

And with the demand more than ever, valuations are justified. For Chawla, the unicorn tag does more than just make the founder and the investor happy.
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“If you were doing a deal at $800 million valuation, you would rather do it at $1.2 billion and call it a unicorn. This will signal to everyone that this company is now funded and competing with it will be difficult. Some bit of the froth is due to the competitive signalling,” he said.

The number of unicorns being produced in India have more than doubled in the past few years.

And it’s not a shocking factor anymore, especially when compared to markets like China and the US, which see crazy valuations and unicorns being produced every year. There are a total of over 650 unicorns in the world, with cumulative valuations hitting $2,173 billion. China and the US alone account for 80% of the world’s unicorns. In fact, China is also home to the world’s most valued unicorn – ByteDance, with a valuation of $140 billion.
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“Look at China, and the number of unicorns they produce every year. There’s a lot of money in the world. But on the other side, it speaks significantly of the depth of the Indian market. The market has grown significantly, GMV is growing, and that’s leading to companies becoming unicorns,” Rehan Yar Khan, managing partner at Orios Venture Partners told Business Insider.

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Serum Institute of India buys into IPO-bound insurance unicorn PolicyBazaar, as True North sells part stake in secondary sale

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