Introduction

As I said in my previous blog, this blog will be the final part of the start-up series.

Today we will learn about unicorns and the evolution of start-ups in India.

What is a Unicorn?

In business, a unicorn is a privately held start-up company valued at over $1 billion.

The term was first popularized in 2013 by venture capitalist Aileen Lee, choosing the mythical animal to represent the statistical rarity of such successful ventures.

According to CB Insights, there are more than 803 unicorns as of August 2021.

The largest unicorns included ByteDance, SpaceX and Stripe.

There are now 30 unicorns with over $10 billion valuation in the world, including SpaceX, Stripe, and Klarna. They have been given the name “decacorn“.

Features of Unicorn start-up

1. Innovation

As we have discussed already, a start-up is a unique innovative concept which has been introduced first in the niche market. Example: Uber, Airbnb

2. First Mover’s Advantage

A first mover is a service or product that gains a competitive advantage by being the first to the market. 

It helps in creating a brand name for them and also establishing its customer support as its first of its kind in the market.

Unicorns try to capitalize this first mover’s advantage and always try to maintain their positioning by constant innovation and improvement.

3. Technology

Most of the unicorn start-ups are technology-based apps like Uber where we book a cab through a phone app, similarly Amazon where we order a variety of things through app. 

87% of the start-ups are tech based, 7% hardware and the rest 6 % on other products and services.

4. Consumer-focused 

The unicorn start-ups are mostly B2C based applications, that is they main focus will be on customer-based models to make their life simple.

5. Private Companies

Unicorns are mostly privately owned companies that get their valuation ($1 billion) when a bigger company acquires it or invests in it.

Valuation of Unicorn 

• The valuation of a unicorn is a complicated process.
• The valuation of unicorns is mostly created by the venture capitalists and investors who participated in the funding series round. 
• As they are start-ups, their value is primarily based on their potential growth and development forecast and not based on their actual financial performance or any other fundamental data.
• Usually, their valuation will be abnormally high as it’s based not on actual financial data but based on their forecasted growth and development.

Reasons for abnormally high valuation of unicorns

1. Fast growth strategy 

As they want to create a demand in the market as quickly as possible before their rivals, they choose a fast growth strategy which most of the venture capitalists rely upon. 

By this method they get a bigger amount in every funding series round and end up in abnormal valuation.

2. Buyouts

As we saw in the funding series most of the start-up ends in the process of IPO. 

But in reality, they actually fail to meet the IPO requirements and end up in tying with tech giants who want to use the start-up technology for their own business as doing from scratch costs them more.

Due to these buyouts the premium is valued abnormally.

3. Innovation

Constant innovation and improvement always helps the start-up business to sustain in the market. 

Through app innovation they are able to reach the mass population at a shorter span.

Evolution of start-up in India

According to CB Insights, there are currently 32 unicorn companies in India. 

In terms of the number of unicorns, India ranks third after the US and China. 

Meanwhile, a Credit Suisse research report says that there are 100 unicorns in India which have created a $240 billion market capitalization. 

After the pandemic, there has been a significant rise in the number of start-ups and contribution of these start-ups to the economy have been immense as they are technology oriented, are always in the process of constant innovation and receive a series of funding from investors or giant companies.

The regulatory clamp down on similar segments in China helped the valuations of Indian start-ups last year. However, India still has a long way to go before its start-ups and venture capital ecosystem can scale up to the level of China. And, this is where change in rules and regulations can help.

India, being the third largest start-up ecosystem and start-ups, irrespective of sectors, are rapidly increasing like never before.

As per the Economic Survey 2020-21, the government has recognized 41,061 start-ups as of December 2020.

In the third quarter (Q3) last year, Indian start-ups received record funding’s, with investment totaling $10.9 billion across 347 deals.

The pandemic has enabled many start-ups in the tech, finance, e-commerce, services and other sectors to take giant strides towards profitability and success.

Conclusion

My main aim when I started with the start-up series blog was to make people of all ages irrespective of their domains to understand the concept of start-up and also to know how it has been evolving all these years especially its gaining momentum after pandemic in India.

As I mentioned in my previous blog, now it is the right time if you want to become your own boss. 

• First research about the problem of the niche market
• Then identify the gap in market, apply methodologies and create hypothesis to make a viable product/service as solution to the problem with the help of initial investment
• Know your market, product/service well to identify the right funding option and also proper forecast to establish as a successful start-up with the help of investors.

You can read the three previous parts in

https://layersofmanagement.com/2022/01/29/a-basic-study-on-evolution-of-start-up-in-india-part-iii/

https://layersofmanagement.com/2022/01/25/a-study-on-evolution-of-start-up-in-india-part-ii/

https://layersofmanagement.com/2022/01/21/a-basic-guide-on-evolution-of-start-up-in-india/

Thank you, guys, for your patience and time to read the entire start-up series!!!