The legendary, mythical one-horned 'unicorn' was the buzzword in the start-up space in 2018. Eight ventures, namely, Zomato, Swiggy, OYO, PolicyBazaar, Udaan, Freshworks, Paytm Mall and BYJU’s attained valuations of $1 billion this year and got the coveted 'unicorn' tag. 

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These enterprises, which cover sectors as varied as foodtech, edtech, software-as-a-service (SaaS), insurance, accommodation and retail, raised massive amounts of in the range of $200 million to $ 1 billion in funding rounds that saw participation from marquee names like Tencent, Sequoia Capital, Naspers Ventures, among others. 

India has the third highest number of start-ups in the world, behind the US and China, which added 25 and 20 new unicorns, respectively, this year. 

The greater number of unicorns reflects upon the maturing of the start-up sector in India, which experts believe is globally perceived as “agile’’ and “disruptive’’.

“From a handful of unicorns a few years ago, India now boasts of 20 unicorns. It is a reflection of the pace at which start-ups continue to disrupt large addressable market opportunities across e-commerce, travel, food, or mobility,” says Ashish Sharma, CEO, InnoVen Capital.

For a fledgeling venture to become a unicorn is a Herculean task. CB Insights notes that the odds of becoming a unicorn are less than 1% for start-ups that have raised venture funds. 

And becoming a unicorn is equivalent to scratching the surface, say experts. “Entrepreneurs should think really big and plan out aggressive overseas expansion,” said an expert.

Sharma says, “In the case of business-to-business (B2B) start-ups, particularly those in enterprise tech, artificial intelligence or robotics, global expansion is imperative as the key addressable market is overseas. Start-ups have to think global as soon as they achieve a product-market fit and that’s how companies like Freshworks and Mu Sigma have built valuable franchises.”

According to Rahul Gupta, co-founder of B2B telecom venture blackNgreen, to stabilise its top rank, a unicorn must seek to create a long-lasting impact on its target customers by digging up opportunities globally. “It is easy to disrupt small markets but for very short time periods, as new businesses always emerge and can replace or dethrone an existing unicorn.”

Serial entrepreneur Bala Parthasarathy, co-founder and CEO, MoneyTap, says start-ups have realised to become a big player, they need to step outside India. “With Google, Apple and Facebook levelling the playing field and creating a universal language, young companies are realising that operating in non-Indian markets is possible and lucrative.”

Also, if a unicorn is restricted to one geography, it could become an easy target for getting acquired by international giants, says Apoorv Ranjan Sharma, co-founder and president, Venture Catalysts. Like Flipkart selling stake to Walmart.

“Scaling abroad in time can help Indian unicorns make overseas acquisitions,” adds Ranjan Sharma. Like Zomato, which acquired Cibando in Italy, Urbanspoon in the US, Menu Mania in New Zealand, etc. 

Overseas presence also helps in increasing the valuations for unicorns. Experts cite the case of OYO, whose valuation jumped manifold to reach almost $5 billion this year, riding on its aggressive thrust in China, the UAE and other markets.

Barring Ola, Zomato, OYO and BYJU’s, not many Indian unicorns have tried to expand overseas. This is because global expansion is not really relevant for some unicorns since they address India-specific problems, says Ashish Sharma, and “large dominant players with similar models already exist in mature markets.” 

Experts, however, believe the new crop of unicorns come with differentiated business models, are backed by strong financials, technologies and human resources, and operate in the key segments of insurance, education, accommodation, etc, thereby enhancing their scope for overseas expansion and consolidation.

Ranjan Sharma says markets like China and the Middle East are easy bets for unicorns looking to expand abroad. “Unicorns can raise fresh capital in these markets and attain economies of scale. China, the Middle East and also Southeast Asia are high on capital, bullish on start-ups, have a host of incubation centres and carry demographics similar to India. After seeking out these markets, unicorns can later look towards the US and Europe.’’

ON RAINBOW ROAD

20 – No. of unicorn start-ups in India, of which:

8 – Hit $1 billion in valuation this year