The Need for Breeding Unicorns!

Published in Startup-Stash of 14 April 2021, earlier.        

The role of startups in creating jobs and rebooting the economy (Shared Venture Builders - Part 1)

Impact of COVID on Job market

While countries like the United States and India are still reporting thousands of COVID cases everyday1, the good news is the vaccination has picked-up pace around the world. As the world picks up pieces from the aftermath of pandemic, the most striking damage to the economy seems to be coming from job-losses, and no immediate recovery seems feasible. ILO estimates the world’s population lost nearly 400 million full-time jobs in second quarter of 2020, and pegs the number at 110 Million for the South Asian population during said quarter, of which India accounts for lions’ share of the total number?1?. CMIE currently pegs the number at 121 million for India alone 2?. While the informal sector may be quick to recover, it will be a long-haul when it comes to the salaried white collar jobs.

Every country urgently needs to create jobs, and millions of them. The old-economy companies are no help; one really hopes they survive and avoid further job losses. The start-up sector on the other hand, can perhaps help reverse the trend.

How good is India’s Startup Ecosystem?

Let us take a quick look at Amazon India — Since the company started its operations in India six years ago it added over 60,000 direct salaried jobs, and perhaps ten times more in indirect jobs in delivery and support services. Likewise, Flipkart — purely a home-grown start-up has over 30,000 direct employees as of 2016.

Every unicorn can potentially create millions of jobs across the world; India currently has 24 of them. NASSCOM estimates there will be 100+ unicorns in India by 2025.

As per a Statista.com report of November 2020, the United States has 288 unicorns out of a total of 66,000+ start-ups, while India which is in the second spot with 8,000+ start-ups has only 21 unicorns. China is the second largest with 220+ unicorns, with UK a distant third with 24 unicorns 3. I have cross-checked the numbers on startup.com 4?and found them to be more or less consistent.

I have seen completely conflicting (and somewhat optimistic) numbers on an Indian media platform called inc42.com. This portal estimates India has a total of 40,000+ active start-ups, 33,000+ DPIIT registered, 34 unicorns with a combined valuation of over $ 115 billion, total funding in excess of $ 63 billion since 2014 into 3204 start-ups.

That makes India the second largest Start-up Ecosystem according to this portal. Personally I am a little skeptical as Alibaba alone (started in 1999 in China) accounts for a valuation of $ 500+ billion today; a view perhaps shared by global investors and researchers. In a 2020 ranking of the best countries for entrepreneurship by Wharton School, Pen University, and BAV Group — Germany scored first place, Japan in second place, and the US a close third. China is ranked 11th, while India is a distant 29 in a total of 80 countries polled?5.

When it comes to City Ranking by Startup Blink: None of the cities in India made it to the global top-10. Bangalore is ranked 14, Delhi 15, Mumbai 22, while Hyderabad is ranked a very poor 96?6. The Inc42 report quotes that over 83% of funding deals since 2014 have come from Bangalore, Gurgaon, and Chennai.

So it is obvious India has a long way to go and urgently needs to get its?start-up strategy?right. Otherwise, India runs the risk of being left behind… once again.

India vs Rest of the World

In terms of absolute numbers, a July 2020 article on yourstory.com?7?mentions there are about 500 incubators in India, while China has 2400+, and the US has 1500+. I believe these numbers must be more or less accurate. While global Accelerators like Y-combinator and Tech-stars have an Indian presence now, the Indian programs are relatively new.

The real picture, however, is not in absolute numbers, but in other measures like ‘access to funds’, ‘average $ investment’, and ‘Gross funding per year’… US is way ahead of both China and India.

A January 2019 article in yostartups.com places India a distant fourth at $ 11.2 Billion, with US at 157 Billion, and China $ 110 Billion, UK at $ 22.7 Billion. The numbers for H1 of 2020 place India ahead of China at $ 19.7 Billion, but this number is skewed because of the $ 15+ Billion invested into Jio.

Unicorns & Job creation

I was keen on finding out approximately how many jobs would have been created by start-ups which grew to be unicorns and super unicorns over the last thirty years. As most would know, ‘unicorn’ is a name coined by Aileen Lee of Cowboy Ventures in her 2013 tech-crunch article, essentially to denote start-ups that have achieved Billion-dollar exits. The same article also mentions on average 3–4 unicorns are born every year, and a maximum of 3 super unicorns (>100 Bn) each decade.

How many unicorns are in existence today? Exactly how many jobs do these unicorns create?

While different sources have different numbers, it is pertinent to remember the two largest Internet companies Amazon and Google were start-ups once. While Google had started out as a research project at Stanford, Amazon literally started out of a garage. Both have valuations of close to a trillion dollars now. While Amazon has created direct employment of over 1.2 million people worldwide, Google employs over 120,000. The indirect employment created by these two companies would be in millions. Google claims its economic impact in the US alone would be around $ 385 Billion?8?.

Suffice to say, the more start-ups you create, the more unicorns you raise… and more unicorns?definitely?means more employment. Every country and every government across the world realizes this now.

The next big questions:

What can one do to make more and more start-ups succeed and become unicorns? Do the current set of Incubators and accelerators make Startups feel welcome, assuming one does get his start-up accepted to be a part of an Incubator program?

More importantly, what should the governments do to support this? After all, the economic growth is largely dependent on job creation.

Also Read:

1. Shared Venture Builders: A model for breeding Unicorns
2. Shared Venture Builders: A factory model for breeding Unicorns

? Krishna Pera / [email protected]

(Contents of this article cannot be used or reproduced in any manner without the express permission of the author)

References

400 Million Jobs lost : ILO (https://cutt.ly/ihI3edC)

BBC: Young bearing the brunt of sweeping job losses (https://cutt.ly/KhI4i5y)

Statistica Report: Global startups- statistics & facts (https://cutt.ly/shOYQ8g)

Startup.com country ranking (https://cutt.ly/jhOYY5W)

US News.com; Best countries for Entrepreneurship (https://cutt.ly/xhI5CvN)

Startup Blink Report (https://cutt.ly/BhOYSnU?).

Yourstory article on Incubators in India (https://cutt.ly/7hXvyyn)

Google on its impact on US Economy (https://economicimpact.google.com/)