India’s unicorn boom shows no signs of slowing down

TOKYO – The number of Indian unicorns – private companies worth $ 1 billion or more – continues to skyrocket. A shocking 15 Indian startups became unicorns in the first half of this calendar year; nine more achieved unicorn status in July and August.

That’s more new unicorns created in India in just two months than the eight that emerged in 2020. This brings the country’s total to 57, closing the gap with China, which has around 160. unicorns, which in turn is just behind the United States, with around 400.

Of the nine Indian companies that became unicorns in July and August, five are engaged in business-to-business (B2B) services, two are in online education, one is a crypto asset exchange, and one is a car market. used online for consumers. . Their makeup reflects the recent rapid expansion of the B2B industry in India. Eight of the 15 startups that became unicorns in the first half of the year were also B2B companies.

A quick glance at the latest unicorns is revealing.

Zetwerk, which broke the $ 1 billion valuation mark in a funding round in late August, has brought various suppliers and manufacturing contractors online. Metal and plastic mold makers, machine part makers, machine builders, precision metal fabricators and others take orders from all over India and around the world using the online platform of the company. Zetwerk also offers customs clearance and other cross-border trade services and working capital financing. This helps small and medium sized Indian suppliers and subcontractors to expand beyond state and national borders. Major US venture capitalists, including Sequoia Capital and Accel, are among the company’s major shareholders.

OfBusiness, which reached a valuation of $ 1.5 billion at the end of July, is an online B2B trading platform specializing in industrial materials – including steel, plastics and cement – as well as grains and other foodstuffs . Manufacturers, construction companies and food processors, among others, use the online platform to source materials. The company also acts as an intermediary for loans from banks and other financial institutions in order to help small and medium enterprises to procure raw materials on the OfBusiness platform. SoftBank Vision Fund 2, a Japanese investor, led the latest round of funding.

BharatPe, which was valued at $ 2.8 billion at the end of July, is a mobile payment platform that allows providers to accept various QR code payment apps such as Paytm and PhonePe with a single QR code and manage transactions and accounting with a single smartphone application. Sequoia and Tiger Global of the United States are the major shareholders. Singapore-based venture capitalist Beenext also invested in the company early on.

BlackBuck is an Indian pioneer in the supply-demand matching of truck transport, an area that extends globally. In late July, the company raised funds from the World Bank’s International Finance Corporation and other entities to reach a valuation of just over $ 1 billion. Sequoia, Tiger and Accel are also among its shareholders.

Until now, many small and medium-sized businesses in India have relied on personal relationships, manpower and money, leaving them mired in low growth and low productivity. The information asymmetry was so great between ordinary small and medium-sized enterprises and large enterprises with nationally operating networks that only large enterprise groups were able to expand their activities nationally and become established. diversify into unfamiliar markets.

But the rise of B2B online services quickly brought this era to an end. This is a classic example of “leapfrog”, in which underdeveloped industries are gaining importance, thanks to the Internet. With the growing number and variety of online B2B services, India’s 60 million small and medium-sized businesses are able to tap into the networks of IT customers, vendors and providers through a personal computer or computer. smartphone.

As more and more of these small businesses use these new services, their growth is likely to accelerate, creating more high-quality jobs and increasing the growth potential of the entire Indian economy.

As the Chinese leadership tightens its ideological grip on big tech companies and other private sector firms, yield-hungry global investors are increasingly placing their bets in other markets. The largest of these is the startup equity market in India. The growing number of Indian unicorns may in part reflect inflated valuations, driven by changing international investment flows.

But it’s also true that these new unicorns are building compelling business models based on new sources of demand. The virtuous circle of abundant funds fueling the growth of promising startups looks set to continue for some time to come in India.

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