?? Valuation vs Reality

“How many unicorns are actually worth more than a billion? Which startups or unicorns are performing well?”

These are among the first questions I encounter when interacting with people in the tech ecosystem. Unfortunately, there are no definitive answers.

Let’s consider eight candidates from India’s first batch of unicorns, which hit the $1-billion mark by 2016. Did everyone live up to the billing?

• Four unicorns, Flipkart , Ola , Paytm and Zomato , have either raised new funding rounds or gone public with an IPO.
• Two, InMobi Advertising and Mu Sigma Inc. , have not raised fresh external capital after facing internal issues or churn in their markets.?
• Three others, Snapdeal | AceVector Group , Hike and Quikr , have restructured their cap-tables, with founders buying back shares from investors at a fraction of their peak valuations
• One, ShopClues , was sold for just $70 million.

The outcomes vary, and this pattern may also hold true for subsequent unicorns.

However, with at least 115 Indian unicorns in 2023, we are looking at a very different scale today. Naturally, concerns about the state of the ecosystem are at a heightened level amid one of the longest funding winters.

Founders who raised money in the 2021 cycle and were forewarned about the changing winds have done their bit by pruning costs. The hard calls have included layoffs, closure of non-core verticals and fixing of processes that were ignored for the sake of growth.

Meesho , for instance, has cut its burn from $40 million to under $10 million, while Unacademy has gone from a peak of $20 million to nearly breaking even. Unacademy holds over Rs 2,000 crore in cash and Meesho Rs 3,000 crore-plus.

But this was only round 1 of the startup survival test.

The upcoming quarters will show if business models are sustainable and at what scale.

• How real is companies’ product-market fit?
• Are they catering to millions of users or merely a few thousand?
• Are customers willing to accept products or services at non-subsidised prices?

Key output metrics, though, may lie beyond the direct control of startups, as they are tied to market size and business maturity.

Aditi Shrivastava

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