Funding Winter: India’s Unicorn Boom Slows Down

Funding Winter: India’s Unicorn Boom Slows Down


Only 21 startups have turned unicorns in 2022 so far as compared to 44 in 2021 

The number of startups entering the unicorn club declined 28% in the first nine months of 2022 as compared to the 29 unicorns produced in the corresponding period of 2021

The funding raised by Indian startups during January-September 2022 fell almost 19% YoY to $22 Bn 

“Prepare for the worst”

Said most investors’ advice for startups in the initial few months of 2022. Now, nine months into the year when the funding winter has clearly set in, the predictions of the investors seem to have come true. Late-stage funding and mega deals in the Indian startup ecosystem have been hit hard by the funding winter. This has also taken away India’s unicorn momentum.

The funding boom of 2021 transformed it into a ‘unicorn year’ for the Indian startup ecosystem, but there has been a sharp decline in the number of startups entering the unicorn club in 2022. Only 21 startups turned unicorns during January-September 2022, compared to 44 startups in 2021.

The number of startups entering the unicorn club declined 28% in the first nine months of 2022 as compared to the corresponding period of 2021 (29 unicorns).

The funding raised by Indian startups also plummeted during January-September 2022, falling almost 19% to $22 Bn in comparison to $27.3 Bn raised during the same period in 2021. 

According to Inc42’s recently launched ‘Indian Tech Startup Funding Report Q3 2022’ report, funding during July-September 2022 fell to 2020 levels. Indian startups raked in $3 Bn across 334 deals in Q3 2022, almost equivalent to $2.9 Bn raised across 278 deals in Q3 2020. 

India's unicorn momentum slows down

Slowdown Brings Focus On Profitability

Despite the large opportunities cited by investors across startup sectors in India, the negative global sentiments have made them wary of investing in startups. The focus has now shifted to revenue generation and profitability of startups, rather than scalability and expansion. 

India today has 107 unicorns with a combined valuation of $344 Bn. Together, these unicorns have raised more than $93 Bn in funding to date with an average funding amount of about $906 Mn

However, only 18-20 unicorns out of these are profitable currently. Indian startups have laid off 12,500 employees so far in 2022 amid the funding winter, of which over 8,000 employees were laid off by just 15 unicorns, citing cost-cutting and restructuring as primary reasons.

Meanwhile, edtech startup BYJU’S recently released its financials for FY21 after a long delay. As many critics had predicted, the startup’s loss sored nearly 20X to INR 4,588 Cr

Among other startups, Nykaa’s consolidated profit after tax (PAT) declined 33% to INR 41.3 Cr in FY22, while ACKO’s net loss increased 3X to INR 382.3 Cr during the year. Similarly, startups like Coverfox, Urban Company, Tata 1Mg, Pepperfry, HealthifyMe, and Yubi also widened their net loss in FY22. 

The ongoing global economic slowdown has resulted in the US dollar strengthening against the INR, which is expected to change the status of many unicorns by bringing correction in their valuations. Many wary investors are also eyeing corrections in valuations to invest in startups, and this is another issue that the Indian unicorns will have to contend with for some time.

The Way Ahead

India currently stands third globally in terms of the number of unicorns, behind the US and China. However, the number of unicorns in the country are expected to increase by 140% in the next three years.

Data suggests that India is now minting unicorns faster than any other country in the world, leaving China, which has 174 unicorns, behind to take the crown. 

According to Inc42’s ‘The State of Indian Startup Ecosystem Report 2022’, India will have 250 unicorns by 2025, second only to the US, which currently has 618 unicorns.

It is worth noting that India produced nearly three-fifths (63) of its unicorns in the last 20 months. At the same time, the time taken by a startup to turn into a unicorn has also reduced to almost half from what it was in 2010. Thrasio-styled ecommerce rollup startups Mensa Brands (6 months) and GlobalBees (8 months) took the shortest time to turn into unicorns, with both of them reaching the $1 Bn valuation mark in less than a year. Further, 38 startups turned unicorns in just five years or under, according to Inc42 data.

While experts are optimistic about the growth in the number of unicorns in the near future, the recent slowdown in the pace of minting unicorns will worry the startup ecosystem. With the funding winter expected to last for 12 months or more, it’s time that the unicorns now push themselves to address the issues around profitability, unit economics, and revenue growth.

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