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Perspective

Real or mythical?
India is churning out unicorns faster than ever. Which start-ups will be the next billion-dollar companies? 

N Mahalakshmi

When Cowboy Ventures' Aileen Lee coined the term in 2013, unicorn start-ups were as rare as the mythical creature they were named after. By the end of 2018, there was one being created every three days and now every venture capitalist wants one in his or her portfolio. While their initial origins were in Silicon Valley, unicorns are now making their appearance around the world.

India is no exception. Having produced 25 unicorns so far, India is making its presence felt in the billion dollar club. What’s more, more than half were added in the past one and a half years. Okay, the US and China do have far more unicorns but what is interesting to note is that there is enough reassurance that Indian start-ups can build businesses of scale. 

There are two significant things that are working in favour of start-ups today. One, internet penetration in India is around 40% and that’s proved to be an inflexion point for successful start-ups in the US and China. Investors are betting the same story will unfold in India. Two, the success of start-ups such as Freshworks, Ola and Oyo have created a global business playbook that emerging start-ups can now follow. 

With capital no longer the constraint it used to be and improving growth metrics thanks to better digital infrastructure, things have never been better for Indian start-ups. So we decided to dig around to see from where the next set of billion dollar start-ups will emerge? Using a combination of their latest valuation, funding raised so far and growth prospects, we have come up with a probable list of India’s next unicorns. That’s our cover story in the latest issue.

There is one glitch in this fantasy story though. Just like in the original term “unicorn”, there seems to be an element of myth in the unicorn ventures too — and that is to do with their valuation. Most venture deals are being done with a “rachet” which essentially means that if the venture ends up raising funds at a lower valuation than expected in the next round, the VC which invested in the previous round would get their price marked down to a lower price. Therefore, how much of the valuation is real and how much is a myth is still a question. But that's a story for another edition.

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