A new report is predicting a big increase in the number of Indian tech ‘unicorns’ – privately held start-up companies valued at over USD 1 billion – from the current 30 to nearly 100 by 2025.
The inaugural India Tech Trends Report by mid-stage technology investment firm Iron Pillar reveals that while India generated almost one unicorn per year between 2011 to 2017, the number spiked to 11 in 2018, with 10 so far in 2019. Of the country’s current 30 tech unicorns, 21 of them were created in the last two years.
According to Iron Pillar partner Mohanjit Jolly: “Iron Pillar’s Unicorn analysis is a proxy for the depth, breadth and scale of innovation and impact that entrepreneurs are having in India and around the world. India has hit an inflection point in 2019. With a stable government, a young aspiration populous, a humming entrepreneurial ecosystem, institutional investment activity, cash being returned to investors, and 30 (and counting) unicorns pulling the Indian innovation chariot, India is truly shining in 2019”. “Unlike China, Indian entrepreneurs will shine not only in different aspects of the Indian consumer-centric ecosystem, but more importantly, build world class enterprise software and deep technology companies to serve the global markets.”
The report also highlights that 43 per cent of the unicorns are in the B2B space (either building products for India or products for the world from India). A total of 50 per cent of the unicorns have been created in E Commerce, Fintech and SAAS segments. However, unicorns are now being created in other segments such as Logistics, Transportation, Food Tech etc, which indicates a growing depth of the Indian tech market. These unicorns have already created USD100 billion+ value with some of them having collectively returned more than USD 20 billion in cash to their investors. Almost a quarter of the Indian Unicorns are building B2B products for the world. Almost 60 per cent of the unicorns took less than 5 years from first funding to unicorn status. More than 75 per cent of them did it within 7.5 years – meaning larger companies are being built faster in India than ever before.
Companies building B2B products for the world from India get to unicorn status require, on average, less than 50 per cent of capital than companies building B2C products for India. While there are a lot of upcoming and promising new VCs, 8 early stage VCs dominate as the most prolific unicorn builders and geographically, Bangalore and Delhi house >75 per cent of Indian Unicorns. Last but not the least, these unicorns are no longer dependent on a handful of late stage investors for funding.
Anand Prasanna, Iron Pillar Managing Partner, says: “The significant scaling up of Indian technology companies we started seeing from early 2018 is very similar to what we observed in China around a decade ago. It takes a combination of market opportunity, development of technology infrastructure, tech talent and layers of early to late stage capital to make this happen. We see all these elements falling in place in India over the past 24 months. Like US and China which have more than 200 private tech companies each now valued at over USD1 billion, we see the landscape in India growing very fast in the next decade. We believe that 200 private tech companies built from India, with total value of over USD1 trillion, is a likely scenario over the next ten years.
We also believe that almost 50 per cent of the private tech companies built from India will address a global market opportunity. Indian entrepreneurs have already proven the ability to build multiple USD10 billion to USD100 billion companies from India in the IT services space, for a global customer base. Product companies, especially in SaaS, are scaling fast now with 7 of them achieving Unicorn status. We clearly see this trend accelerating in India with strong growth and unit economics demonstrated by a sizeable pipleline of enterprise software companies that have reached USD10 million in ARR with significant year on year growth.”
