India Now Creating Unicorns Faster Than China


In the last 20 months, the Indian startup ecosystem churned out 60% of the country’s 105 unicorns

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

India’s unicorns are valued collectively at $341 Bn, having raised $93 Bn in funding over the last two decades

India currently has 105 unicorns and this number is expected to increase by 140% in the next three years. According to Inc42’s latest ‘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.

The 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. Israel closely follows India with 96 unicorns and is on its way to entering the three-figure mark. 

India producing unicorns faster than China

It is worth noting that India produced nearly three-fifths (63) of its unicorns in the last 20 months. The year 2022 has so far produced 19 unicorns, which is almost 44% of all the unicorns minted in 2021. The country’s 105 unicorns are valued collectively at $341 Bn, having raised $93 Bn in funding over the past two decades.

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India has the third-most unicorns in the world after the US and China

Indian Startups Turning Unicorn Faster Than Ever

Inc42’s ‘The State of Indian Startup Ecosystem Report 2022’ indicates that Indian startups are turning unicorns in half the time post-2010 as compared to the time taken by them before 2010.

Thrasio-styled ecommerce rollup startups Mensa Brands (six months) and GlobalBees (eight 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 five years or under, according to Inc42 data.

50% reduction in avg time taken for an Indian startup to reach unicorn status

How Regulations Impact The Rate Of Producing Unicorns

In the Mann Ki Baat programme in May, Prime Minister Narendra Modi lauded India’s startup ecosystem for producing 100 unicorns. More importantly, PM Modi said that the country’s unicorns have a faster average growth rate than those in the US, the UK and other nations.

Over the last three to four years, the Centre has been working with startups to issue clear guidelines for fast-evolving sectors such as fintech and ecommerce, which impact the lives of millions of users daily.

These two sectors are also the biggest unicorn makers in the country – three out of every seven Indian unicorns are either from ecommerce or the fintech sector. For instance, the Reserve Bank of India (RBI) recently issued new guidelines for the burgeoning digital lending sector. Besides, draft ecommerce rules and draft ecommerce guidelines are also under discussion.

Sectors such as deeptech and cryptocurrency are also under the purview of various regulatory authorities. However, crypto finds itself in a regulatory grey area with no clear guidelines from the government, which can hit VC funding for India’s crypto startups

A clear regulatory framework ensures that the consumers are safe and startups don’t have to change their business model to adhere to the changing regulations. The good news is that the regulators also seem to be realising this fact. 

Download The State Of Indian Startup Ecosystem Report, 2022

The Road Ahead

Last year turned out to be a momentous one for the Indian startup ecosystem, with 11 unicorns, including Paytm, Zomato and Freshworks, coming out with their initial public offerings (IPOs) and getting listed on the exchanges.

The year 2022 also got off to a good start, with the funding momentum towards the end of 2021 being carried forward. Indian startups raised $11.7 Bn in the first quarter itself, creating 14 unicorns in the process and reaching a total of 100 unicorns by May 2022. 

However, the funding momentum died down in the second quarter of 2022. The Indian startups raised only $1.16 Bn in July 2022, down 90% year-on-year (YoY) from July 2021 when Indian startups raised $11 Bn in funding.

The ongoing war in Europe, rising inflation rates and tightening of monetary policies by central banks have made investors wary and led to a decline in funding, which is being called the ‘funding winter’.

The negative sentiment has also brought the focus on the profitability of many of the unicorns who, despite growing exponentially, continue to make losses. Consequently, many startups have resorted to layoffs to conserve cash and increase their runway.

Decacorns (at last private equity valuation) such as Paytm and Swiggy, Ola and Zomato have found themselves in the crosshairs of the regulators, and none of them is profitable as of now.

While there have been certain questions on the valuation and profitability metrics of Indian unicorns, these companies undoubtedly have created a sizable impact on India’s startup ecosystem. Besides, the likes of Zomato and Paytm have also started talking about getting breakeven in near future.

According to Inc42’s ‘Decoding India’s 100 Unicorns’ report, these startups have created more than 3.8 Lakh jobs. Also, Indian unicorns have also seen 326 M&As to date, aiding the ecosystem and helping investors get visible exits.

The tech-enabled startups have laid a solid foundation for the country to reach its goal of having a $1 Tn digital economy in the next three years. 

Despite the temporary issues, the Indian startup ecosystem seems to be on track to keep producing unicorns, providing a boost to the country’s ambitions of becoming an economic superpower.

Download The State Of Indian Startup Ecosystem Report, 2022
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