If economists had predicted at the start of the uncertain year that 2020 has been, a unique surge of unicorns in India startup ecosystem, it’s safe to think the claims ungraciously rebuffed. But the way industrial and businesses interactions transact, is an interesting pattern, such as the unforeseen birth of eleven Indian unicorns in an unstable business year. Call it upon the disruptive technologies that have altered how businesses conceive or blame the connectivity for blurring geographical peripheries, the world now suffers from a global mindset. This can be said as a catalyst of the spirit of entrepreneurship and innovation, supported by the holistic inter-play of all market stakes.
The last decade rightfully belonged to startup ventures, ruling over in times of unprecedented growth, or even stability. Coined by venture capitalist Aileen Lee, “unicorns” represent the statistical rarity of extremely successful businesses. The year did begin heralding caution with fears of “black swan” situation to be the future, but we are now assured of quite the opposite.
Say 10 years back in time, entering a new market or a new cultural market was a daunting practice which secured couple of years for merely understanding the combinations of work and skill sets, to begin with. Today, these are so easily secured control over with manageable risks that it has created a safe environment for talented minds and their startups to usher. This ecosystem has grasped the whole world and India is not left out in the bandwagon. The new 2020 India saw 11 new members of the unicorn club, a graceful addition to 9 in 2019, and 8 in 2018. These are Unacademy, Pine Labs, FirstCry, Zenoti, Nykaa, Postman, Zerodha, Razorpay, Cars24, Dailyhunt and Glance.
Needless to point, companies with swift digital adaption of business operations have dominated the race of market growth and the investors, pleasantly surprised, have rewarded them. An early setback caused by the pandemic persuaded these firms to frantically reduce cash burn and redeploy existing capacities in a bid to tide over the uncertainty.
Unicorn firms also generally play with the rule of “The Firsts”. They are starters in their respective industrial bubble. They create a need that people did not already realize and gradually change the way things are done. They create a necessity for themselves. They enter silently and create an inseparable dependence on themselves. They are the best exemplifications of ground breaking innovation as they birth a disruption in the industry they belong to. They bring to table, unimaginable ease in consumers life, at most affordable prices. As an instance, Uber changed the way people commuted. These consumer centric companies work with an aim to become a part of daily life, making it obligatory to be availed. 62% of the unicorn club comprises of B2C (business-to-consumer) companies.
The big secret agent is also the strategy quickly adopted by investors and venture capital firms called the “Get Big Fast” (GBF) strategies crafted for startups. It entails a startup trying to expand and diversify at full pace by means of huge funding rounds and a lot of price cutting to quickly possess market share. That’s why it’s no surprise why most unicorns emerged out of buyouts from public companies. In a slow growth market scenario working with low interest rates, business giants like Apple choose acquisitions over internal investments to bolster their stand. That’s how InMobi Group’s Glance raised $145 million from Google plus Mithril Capital, an investment fund of Peter Thiel, co-founder of PayPal and Palantir Technologies.
The late stage funding has proved immensely lucrative as opposed to the disastrous low in seed stage. However, seed funding is the most important because it establishes itself as the starting point for companies. The decade witnessed increased startup seed incubators and accelerators which categorize as academic institutions, government controlled and corporate accelerators. The most fulfilling agent has been already successful large businesses incubating startups before them being spun off and attracting external investors. The culture of unicorns spawning unicorns also indicates moving up the value chain for such companies.
Despite companies selling fresh stories and birthing new unicorn club members, the undeniable fact is that they operate as different entities. For instance, PhonePe and Paytm mall are completely diverse business prints from Flipkart’s ecommerce and Paytm’s financial technology ventures. But that’s the testing waters for the parent DNA of the unicorn to make more. Investors do make a very careful assessment of how the parent companies nurture these babies. However, it is pertinent to note that a vertical integration will support and compliment the business, unlike the case of a lateral integration which might just be a vivid scope for fresher opportunities or helping the ecosystem.