The Startling Decline of Unicorn Companies in India — What's Going Wrong?

In 2023, the Indian Startup Ecosystem produced 2 Unicorns: InCred Finance and? Zepto, in 2023. That’s it! Just 2.

Compared to 45 Unicorns in 2021 and 21 in 2022, the growth spur of startups has fallen sharply in the last two years, leading to just two startup joining the Unicorn rank in 2023. The main reasons that you’ll see behind this decline would be economic slowdown and layoffs. But there’s something else repelling over 1,12,718 Indian startups from getting a valuation of $1 billion.?

Who Do We Blame It On?

Starting from the end of 2022, the Funding winter began in India for Startups that are key contributors to innovation and over 1 million direct jobs. Despite the government’s various initiatives to promote business growth and Foreign Direct Investments, startups have failed to secure either a good deal volume or a deal itself.

The first reason, according to my experience, is the rapid shift from being an independent funding magnet to a comparable venture dependent on the investors shopping in a huge marketplace.

The impact? Lack of conversion from idea to innovation in the quest to woo investors with mainstream likings.

The result? A pocket-pinching 61.66% decline from 60 mega funding deals in 2022 to just 23 in 2023.

The second reason for this downfall would be the reduction in Foreign Direct Investments from $84.82 billion in 2022 to $70.97 billion in 2023.?

This decline was not observed in just the initial stage, as late-stage, early-stage, and seed-stage rounds all experienced significant decreases in funding, reflecting the evolving Indian investment landscape.?

My entrepreneurial experience has taught me one lesson: “Staying bootstrapped with your original idea intact is better than molding it if you want to attract investors.”

This is somehow the main reason why investors come looking for your brand. Innovation with potential always prioritizes profitability over valuations!

While Byju’s took the extreme step down as a Unicorn, many more have lost their status in valuations this year. Some may credit this fall to losing investor interest, but I will credit this change to a lack of confident management decisions due to investor pressure.

The third reason is external, where recently introduced government regulations, shortage of skilled talent, and global economic slowdown pull the overall interest of investors in startups down. These factors will fade with time, giving a fresh opportunity to raise valuations and close big funding deals.

India is ranked #7 in Resident Patent Filing activity globally, meaning original innovation is booming. This strongly tells me that Indian entrepreneurs need to focus on profitability, building better systems to keep the growth pattern sturdy, and letting the investors come to them.

Remember, the top investment firms have a huge repository of startup hunters constantly observing every move and laying their hands on the right product first. The government has?

Based on the above observations, I predict a surge in Indian Unicorns by 2025. What do you think?