A decade since the birth of its first unicorn — InMobi, a provider of advertising services for mobile phones — India has proved that these capital-fuelled creatures aren’t so rare, minting 30 of them in 2021 so far. That’s more than the 28 that joined the coveted club in the first eight years of the past decade.
Bengaluru-based CoinSwitch Kuber, a trading platform for crypto assets, on Wednesday became the latest Indian startup to join the unicorn club with a valuation of $1.9 billion, higher than rival CoinDCX’s $1.1 billion valuation announced in August.
Gopal Jain, managing partner of venture capital fund Gaja Capital, attributes the burst of capital to the “massive savings surplus globally, thanks to the unprecedented fiscal support in developed markets or in other words, cheap fiat money”.
Jain, however, advised startup founders to use the capital available now to build viable businesses that can sustain themselves as the money flow may stop at any time. “We have seen this many times before—companies can lose 99% of their value when they can’t survive without financing,” he said.
Jain admitted that it’s difficult to predict how long the easy availability of capital will last, “but inflation is a lead indicator that rate action can be expected, which will affect fund flows”. He believes that two structural factors favour Indian entrepreneurs. First is “Indian digital tech acquiring global scale”, and the second is “rotation (of money) out of China”. Jain believes these trends are likely to sustain.
If these trends prevail, more Indian startups will turn unicorns in the coming months. India is already home to more than 60 unicorns, according to VCCEdge, the data intelligence platform of VCCircle.
By 2025, the country is expected to host as many as 62,000 startups, including 100 unicorns, according to an October 2020 report prepared by TiE- Delhi, a not-for-profit promoting entrepreneurship, and Zinnov, a management and strategy consultant.
Other reports corroborate these numbers, with some going a step further. Early-stage venture capital fund 3one4 Capital predicts the number of startups to jump to 100,000 in 2025, with more than 150 unicorns in the same period.
‘Gazelles’ and ‘Cheetahs’
India also has numerous so-called soonicorns, or potential unicorns. The Hurun India Future Unicorn List 2021 calls them ‘gazelles’ and ‘cheetahs’. India has 32 gazelles and 54 cheetahs, according to the list that was released late last month.
A ‘gazelle’ is a startup founded after the year 2000 and has the potential to become a unicorn in two years with a current estimated valuation ranging from $500 million to $1 billion.
Six gazelles are in the e-commerce sector, followed by five in fintech and three each from artificial intelligence, gaming and shared economy sectors, according to the Hurun report.
Cheetahs, on the other hand, are startups founded after the year 2000 and have the potential to become a unicorn in the next four years, with their valuation pegged between $200 million and $500 million. India is home to 54 cheetahs that have received a cumulative investment of $6 billion, according to the Hurun report. With 13 startups, fintech leads the cheetahs list, followed by e-commerce with 11.
While the e-commerce sector has dominated investor interest in 2021, receiving $11 billion and accounting for 23% of the total investments this year, financial services have quickly caught up after a lull post the pandemic to emerge as the top sector in August, recording $2.2 billion versus the $1.2 billion recorded in August 2020 and $435 million in July 2021, according to a September report by consultant EY and the Indian Private Equity and Venture Capital Association.
The Indian startup ecosystem, the third-largest in the world, is likely to triple its valuation to $1 trillion by 2025, according to 3one4 Capital.