Are Indian Startups Reaching Unicorn Status Too Quickly? Why?

Indian startups are quickly gaining unicorn status due to the steady entrepreneurial mindset

The year 2021 is an epic year for private equity (PE) and venture capital (VC) investments in India, with investment activity reaching an all-time high of approximately US$60 million. Since 2017, PE and VC investments have been experiencing year-on-year growth. Investments in Indian startups have been a defining feature in 2021 as private investors committed over US$30 billion to Indian startups, compared to US$11 billion in 2020, based on reports. These are the major factors why the country is drawing the attention of the biggest tech innovators in the world. India is minting unicorns at an unprecedented rate, adding over 40 unicorns in 2021, and is being speculated of doubling its unicorn rally in 2022, making it up to 90. The country is now being distinguished as the third-largest unicorn hub in the world, after the US and China. India’s unicorn club is booming as more investors continue to flock to its burgeoning tech ecosystem.

India’s startup unicorn generation collided with China’s last year as the latter brought down a major crackdown that spooked international investors and interrupted them to look for alternative places to invest their money. This took place at a time when almost all global industries were experiencing crises during the emergence of the Covid-19 pandemic, which prompted businesses to turn to conduct operations online. The pace of unicorn production again gained pace in 2022 as global economies started recovering even amid major volatilities. Experts believe that India is an example that denotes the term ‘unicorn’ is not as important or does not hold much value as it did before.

How did India become a flourishing investment hotspot?

The Indian tech startup ecosystem did extremely well in 2021. As businesses moved to utilize services online, the products that these emerging Indian startups provided made all the difference in efficiently conducting operations in the virtual mode. Investment experts believe that early-stage investments in potential startups are accelerating the pace at which Indian startups are excelling in the global entrepreneurial ecosystem.

The availability of a large talent pool who are seeking entrepreneurial opportunities is also one of the major reasons why the country is producing unicorns at a dramatic rate. India is a country that has realized the need to advance innovation and incubation centers for its vast student to foster growth and development of the entrepreneurial mindset. The IIMs, IITs, and R&D institutions are driving this agenda with the help of state governments. The rising number of incubators is supporting young business leaders to start their own ventures and propelling entrepreneurship and the early-stage startup ecosystem in India. The availability of young talent with the right blend of passion and expertise is highlighting young Indian entrepreneurs in the booming global industrial market.

Bottom Line

The role of the Indian government in advancing the growth of Indian startups is quite crucial and definite. The implementation of progressive policies and the creation of relevant infrastructure is the key to supporting young minds. Moreover, introducing reforms such as opening up space for private participation and fulfilling certain criteria like annual turnover and a year of incorporation also works on the working capital requirements. Currently, India’s rising number of unicorns only demonstrates that the country is about to knock off competitors and reign over global industries.