Indian Unicorns On Sky-High Valuations, Fundraising And Scaling Up

India is home to over 40K startups, but only 31 Indian startups have managed to reach the unicorn club with a billion-dollar valuation. Indian unicorns account for less than 1% of all startups in the Indian ecosystem right now.

However, the number of Indian unicorns has steadily increased in the past couple of years. Between January 2018-December 2019, alone, Indian witnessed the entry of 17 unicorns — more than doubling the total number in just 24 months.

These included the likes of BigBasket, Druva, Icertis, Delhivery, BlackBuck, Dream11, Udaan and Ola Electric. In the first month of 2020, India also welcomed SaaS company HighRadius into the unicorn club. At this rate, according to DataLabs By Inc42, India is poised to get 100 unicorns by 2025.

Is Unicorn Valuation A Fallacy?

Even though unicorns manage to clear the hurdle of valuation, profitability is still a long way off for some of the big players in the market. Talking about the same founders of BookMyShow and Dream11 spoke about the loopholes in the unicorn club’s entry ticket.

Dream11 cofounder Harish Jain emphasised on the need for “revenue-corns” in the Indian startup ecosystem. Jain defined revenue-corns as companies with $1 Bn revenue, instead of simply going by valuation on paper.

“This valuation metrics is just a piece of paper and we should stand by the fact that we should rename unicorns to revenue-corns. People that have a revenue of $1 Bn dollars can be entitled to be revenue-corns. That will actually be worth something,” Jain said.

He also highlighted that people don’t understand that different investors come with different preferences and rights in order to get their returns. He also highlighted that a lot of investors demand voting rights in the company, without giving a second thought to the valuation.

“There are some kinds of rights you can’t imagine that people come with. You can write whatever valuation you want, as long as I have all the [voting] rights in the world,” he added about the mentality of some investors.

Jain also noted that currently, there is a mass herd mentality into making unicorns. “I have barely met an entrepreneur, who has built a great success business, who started by saying ‘I’ll make a unicorn’.” He noted that good businesses start by looking to solve a problem. Jain noted that he’s not running Dream11 to build a unicorn and exit, but to serve the underserved sports fans.

On being asked if BookMyShow based its business strategy around becoming a unicorn, founder Ashish Hemrajani added that the unicorn club “is a total fallacy”.

“Enterprises are built over 25-30-40-50 years, if you want a quick fix, there are no quick fixes. You cannot build a company in two years or three years, you can make a fool out of someone in two, three years,” BookMyShow’s Hemrajani, added.

Hemrajani also noted that the entrepreneurs should not focus on building valuation and giving investors an exit. “The investor’s job is to exit, your job is to leave a legacy and enjoy the journey and the byproduct,” he added.

BookMyShow’s Hemrajani said the startup community to make their Monday morning as exciting as a Friday evening. Hemrajani said that after a relaxing weekend, he goes back to the office brimming with ideas on what things to do. He specified that it’s not about big world-changing gains, but about incremental gains.

“Also, you must have a purpose in life and a purpose of business. Valuation, money, cash are by-products and those will come. Entrepreneurs need to understand that — all they read is newspapers talking about valuation, how much money was raised. These are vanity metrics.”

The Importance Of Setting The Right Culture

BookMyShow’s Hemrajani also said that there are worse ways to make money than raising funds, but an entrepreneur needs to have a purpose, culture and integrity in the business. He emphasised that the entrepreneur should build that integrity “into the DNA of everybody in the business. The role of the founder is to do that.”

Dream11’s Jain also spoke about the importance of culture in scaling a business. He said, “Culture is the only thing that I scale… In the last 5 years, we have paid a lot of attention to it and that has helped us scale faster, better than we were.”

Speaking in a different session, Snapdeal founders Kunal Bahl and Rohit Bansal also spoke about the need for trust, communication and setting up priorities into setting up a business. Bansal said that at any given time, the founders never take up more than 2-3 ideas or projects. “If we want to start something new, which is very exciting, we put a rule upon ourselves that we need to shelf one of the ongoing tasks, to pick out another one,” he noted.

Bahl, on the other hand, noted that at Snapdeal, the leadership spends a third of the time communicating with each other and this comes handy in the long run.

Sound Unit Economics Are Need Of the Hour

Bahl and Bansal also laid stress on the importance of unit economics.

“Positive unit economics means the consumer is allowing you as a company to make money while serving them. Negative unit economics means you are having to pay the consumer to use your service. Our view for the last few years is that we made a lot of errors to get to this realisation,” Bahl said.

Bahl also noted that even VCs have shifted their focus from gross merchandise volume to unit economics. He attributed these pivoted priorities to the growing impatience among investors to get returns.

“They are realising that there is slightly less correlation between GMV and building lasting enduring value for a company,” he added.

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