When Unicorns fly

Start-upland in India is dwelling more and more unicorns.

Joining high-profile brands like Ola, Flipkart, Zomato, ShopClues, Quikr, Paytm are a new breed of innovative ventures that have raised significant funds and attained valuations upwards of $1 billion.

So far this year, eight start-ups including budget hotel chain OYO, edtech platform BYJU's, retail marketplace Paytm Mall, online financial marketplace PolicyBazaar, food delivery channel Swiggy and SaaS enterprise Freshworks achieved the unicorn tag. The newer unicorns could take the India unicorn count to about 20 in the near future, say experts. As per the Global Unicorn Index, USA has the maximum number of unicorns at 116, followed by China at 71.

Experts say the rising number of billion-dollar ventures bodes well for the ecosystem as it signifies the coming-of-age of the sector and helps in attracting greater attention from investors.

Mrinal Mohit, COO, BYJU's -The Learning App, says, "Unicorns are a reflection of the maturity of the ecosystem and high market aspirations. Unicorns can inspire millions of aspiring entrepreneurs to evaluate their ideas and kick-start their journeys."

Experts say unicorns carry more muscle to pool in investors and fund-houses into India, especially the top-ranking ones like Alibaba, SoftBank and Tencent Holdings. In 2017, about $13.7 billion was pumped into Indian start-ups, across 820 deals. Of this entire amount, Ola, Paytm and Flipkart had received over $1.5 billion each.

According to Anirudh Damani, managing partner, Artha Venture Fund, from an investor's point of view, a start-up attaining unicorn status not only generates impressive monetary returns but also makes the investor community more confident to back newer start-ups, as well as early-stage ventures.

Unicorns also entice investors to pump in funds into the sectors in which they operate, experts say, thereby bringing in investor attention to niche segments like edtech, fintech, food-delivery, software as a service (SaaS), etc.

"Unicorns provide investors with added confidence. Besides, budding entrepreneurs garner positive feelers that the scale they are looking to achieve is very much doable,'' says Siddharth Jain, co-founder of online marketplace Vaahika.

Experts feel unicorns, with their investor backing and scale, are in a much better position to steer mergers and acquisitions (M&As), form alliances, and expand exponentially, especially in the overseas market, just like Ola and OYO have been doing. "M&As and overseas expansion is crucial as it strengthens the start-up market in the country. Unicorns are in a better position to attain this as compared to other start-ups," said an expert.

Moreover, unicorns can lead to aggressive job creation. Experts say while each emerging start-up on an average can generate anywhere from five to 500 jobs, unicorns can generate jobs in thousands.

Currently, the sector directly employs between 1.5–2 lakh people across various ventures, of which approximately 40,000 jobs were generated in 2018, says Nasscom.

Job generation is vital to the economy. And when the start-up sector creates jobs, it only goes to prove that the sector is sustainable and is maturing at a rapid pace, say experts.

Mohit says millennial professionals and job seekers, on the other hand, benefit tremendously by associating with start-ups and unicorns as they gain the flexibility to pursue their potential while working to build innovative platforms and solutions that address pressing market needs.

However, building unicorns is an incessant activity requiring direct participation from all key stakeholders and not just the entrepreneurs and founders.

"Government policies that help towards the creation of a favourable investment environment forms the most important element that start-ups require to travel the path to become a unicorn,'' says Jain.

According to Damani, it is imperative for the government to improve the tax infrastructure and bring it in line with the entrepreneurial realities of today. "The current structure is open to interpretation and exploitation at the hands of the tax officers, which allows them to terrorise investors and entrepreneurs and stunts the growth of the ecosystem. India currently ranks 100 out of 190 countries on the Ease of Doing Business Index, and 156 on the Starting a Business Index. This goes to show that there is a dire need to simplify the process,'' says Damani.

FAIRY DUST

• $13.7 bn – Was pumped into Indian start-ups in 2017
   
• 820 – No. of deals during the same year