Unicorns may be mythical beasts in the animal kingdom but in Indian business, they are becoming more and more common. The unicorn here is not a fabled horse with a horn on its head but refers to a specific type of company. To those unaware, a unicorn is a start-up company which surpasses a $1 billion valuation. The term was coined in 2013 by venture capitalist Aileen Lee as it refers to the statistical rarity of this happening.
Start-up companies are notoriously difficult to succeed. Even turning a profit is an achievement but it is nothing short of extraordinary for a start-up to reach $1 billion. The start-up industry in India has had its ups and downs but the last few years have seen a marked increase in the number of unicorn companies: from 3 in 2014 to 14 in 2018, according to CB Insights.
India now sits third in the table of countries with the most start-up unicorn companies behind powerhouses the United States and China. The newest Indian start-up to join the list is Oyo Rooms, a hotel chain which surpassed the fabled $1 billion mark for funding. The company which was started in just 2013 by a then 19-year-old Ritesh Agarwal received the funding from the Japanese SoftBank Vision Fund and has become the largest hospitality company in the country.
But Oyo Rooms is just one of a number of Indian companies to achieve this incredible feat in the last few years. Why is this happening? China and the United States are expected to be at the top of the list of countries creating unicorns considering their economic clout but why India? Let’s take a look at some of the reasons why.
India is getting more and more addicted to the internet. The country now has over 450 million internet users and that number is only increasing thanks to initiatives like discount mobile data plans. That is aided by the ever-growing list of smartphone users in the country. According to the Hindustan Times, India has 400 million smartphone users and that number is expected to increase to 700 million within five years.
The largest sales spike comes for phones priced lower than $150 (Rs 10,000) and a number of mobile phone companies are now actively looking towards this market.
“Features such as full-screen displays, dual-cameras, biometric security and support for Artificial Intelligence (AI) are beginning to make in-roads to the mid-range. They will become widespread over the next few years,” said Tarun Pathak, Associate Director at Counterpoint Research.
Another key reason why Indian start-up culture is thriving is the incredible amount of choice available to the consumer. This desire to get to work and start up a company is not as common in other parts of the world. A recent study by Betway Casino asked people in the United Kingdom what they would do with £1 million. Just 5% of respondents said they would start a business, despite the small risk which would be involved.
India produces far more start-up companies and this allows the best companies and products to float to the top, eventually culminating in many of them becoming unicorns. Even something as simple as food delivery, Indians have a wide array of choice available to them including Zomato, Faaso’s, Swiggy and TastyKhana.
Addressing The Country’s Problems
One of the main reasons why India is producing more unicorns than ever is because these companies often address some of the country’s most desperate needs: education, logistics and accommodation. Just look at Byju Raveendran’s company, BYJU’s, an educational technology and online tutoring company. Many schools don’t have enough funding to hire teachers but the app has reached almost 1.7 million users who pay around $135 per year for access. BYJU’s is adding around 130,000 students each month.
“Think of the effort and the capital involved in building thousands of schools and training teachers,” Raveendran has said.
“A young population, increased spending power, and rapidly growing digital infrastructure are helping India-relevant models to scale quickly.”
That certainly seems to be the case. India’s start-up industry is notoriously unsteady. However, it seems as if things are going extremely well right now, even if it is just for a small handful of companies. These are the brands which have risen to the top from a wide array of competitors and are servicing an increasingly technological nation by addressing its needs. If Indian start-ups continue to do that then there is no reason why the number of unicorns won’t increase in the coming years.