India evolving into a global unicorn hub | Deininger Consulting

India evolving into a global unicorn hub

India has been witnessing a strong surge of entrepreneurial force in recent years.

The country is currently the world’s 3rd largest start-up ecosystem and home to 44 unicorns (companies valued at over $1 billion). Of these, 9 joined the unicorn club in 2020; and the first 4 months of 2021 have already witnessed 8 companies achieving the unicorn status. Industry experts believe that the number of unicorns in India is expected to rise to 100 by 2025. Given the pace at which soonicorns are growing and new start-ups are getting established, it will not be a surprise if that milestone is achieved much earlier. 

So, what is propelling this phenomenal growth? India’s domestic consumption driven economy, demographic dividend, technological advancements, product, service & delivery model innovations, fast growing digital adoption & internet penetration, government initiatives like ‘Start-up India’, robust supporting ecosystem and availability of high-quality talent are the key factors contributing to the start-up growth story.

The fintech / payments (18%) and e-commerce sectors (16%) have been the biggest contributors to the unicorn club. However, sectors such as data analytics, software-as-a-service (SaaS), and ed tech are fast gaining prominence. When it comes to geographic hubs, Bengaluru leads the race with nearly 41% of the unicorns headquartered in the city regarded as the ‘Silicon Valley of India’. Bengaluru is followed by Delhi/NCR and Mumbai which account for nearly 30% and 14% of the unicorns’ base locations, respectively.

Bristling investor confidence

The investor activity in the Indian start-up sector has been robust over the last 5-6 years. As per an industry report, between 2014 and 2020 Indian start-ups received total funding worth c. $70 billion across almost 6,000 deals. Sequoia Capital is the leading investor with stakes across 14 unicorns; closely followed by Tiger Global and SoftBank who have investments in 13 unicorns each.

What is intriguing is that the investor community’s interest hasn’t been dented by the Covid-19 pandemic. While the average ticket size may have dropped compared to 2019, Indian start-ups still attracted funding worth c. $11.5 billion in 2020 and came close to the historic peak of 2017 in terms of number of deals. These are hugely encouraging signs for Indian start-ups as they continue their growth march despite the Covid-19 triggered crisis.

It’s still a boy’s club – but wheels are turning

Historically, the proportion of women entrepreneurs in the Indian start-up ecosystem has been rather slim. The unicorns are no exception, therefore, with women accounting for less than 5% of the Founders / Co-Founders in these companies. However, the scenario is gradually evolving, and the last few years have seen reasonable traction in the number of women entrepreneurs joining the start-up club. As per the Government of India statistics, in 2019 the number of women entrepreneurs stood at 14%, up from 10% and 11% in the previous two years.

According to an industry report, there has been nearly 11-fold growth in the number of women entrepreneurs in technology start-ups since 2010. Fintech and consumer tech are key sectors which are witnessing growing emergence of women entrepreneurs. Interestingly, women are also venturing into offbeat and male dominated segments such as automotive, cleantech, SaaS, and online gaming.

However, while the number of women led start-ups are on the rise, there appears to be a considerable investment diversity gap. As per the report, during the period from January 2018 to June 2020, only 22% investors, made investments in start-ups led by at least one-woman founder. 

Leadership skills in demand

As the unicorns continue to scale up and expand, the need to hire qualified and competent professionals in business-critical leadership roles becomes increasingly vital. Leadership talent across key functions such as Technology, Product Management, Marketing and Finance are constantly in high demand.

Despite the Covid-19 induced slowdown, start-ups have continued to recruit critical positions of Chief Technology Officer, Chief Product Officer, Chief Marketing Officer and Chief Financial Officer and the senior leadership team below these.

Going beyond the subject-matter expertise that they possess, these professionals are often hired by start-ups to help institutionalise their business, implement the right systems, processes & best practices, and develop the team & capability below them. Most start-ups looking to recruit these senior positions, seek goal driven & action-oriented individuals who bring a sound blend of strategic capability and operational rigor. These organizations are keen to hire leaders who are agile, enterprising and can operate in a dynamic & constantly evolving start-up environment.

Apr 20, 2021