India Has the Third-Most Unicorns. Can It Be First?
Hyderabad, India
India has the third most unicorns — start-ups with at least a $1 billion valuation — of any country, only behind the U.S. and China. The nation is home to 118 unicorns and is the fourth-largest start-up market by venture capital funding, as per Inc42. With its first unicorn, InMobi—a mobile platform enabling advertisers to send text messages to consumers—reaching a $1 billion valuation in 2021, India's unicorns collectively grew their valuations to $354 billion in just 12 years. Can it keep momentum and overtake the U.S. and China, or is this a balloon waiting to pop?
Growth India's rise as a unicorn powerhouse was turbocharged by global investor interest, with more than $42 billion in venture capital pouring into startups in 2021—nearly quadrupling the $11.5 billion raised in 2020. The pandemic-driven shift toward digital solutions played a major role, with India producing an average of three to four unicorns per month between 2020 and 2022, a rate rivaling the U.S. and China. In 2021, India added 44 unicorns.
But India's startup ecosystem didn’t just thrive on global trends; it capitalized on its domestic gaps. A glaring lack of financial infrastructure created fertile ground for fintech companies, which exploded in popularity as they offered payment services and digitized India’s financial system. Fintech now dominates the unicorn scene, with 24 of India’s unicorns operating in the sector, followed by e-commerce (23) and SaaS (19). India’s rapid adoption of digital payments, with the government pushing initiatives like UPI (Unified Payments Interface), made fintech startups especially attractive to investors.
These companies have played a role in transforming Bangalore, Hyderabad, and other Indian cities into global tech hubs.
Winter Is Here The "growth-at-any-cost" model that defined much of India’s startup ecosystem is now under intense scrutiny. 2024 has seen several high-profile unicorns face steep valuation cuts. Many companies that raised billions during the funding boom are now struggling to raise new capital as investors prioritize profitability over rapid growth. Global macroeconomic headwinds—rising interest rates, inflationary pressures, and slowing global growth—have made it harder for startups to maintain sky-high valuations.
By mid-2024, Indian unicorns were no longer popping up with the same regularity. In 2023, India added just 19 new unicorns, down sharply from 44 in 2021. This slowdown coincided with a 50% decline in global venture capital funding into Indian startups, which fell to $21 billion in 2023, down from $42 billion in 2021. For the first time in a decade, funding for Indian startups slowed significantly.
One of the biggest challenges Indian unicorns face in 2024 is navigating the "funding winter." After years of rapid capital inflows, the tightening of monetary policies globally has dried up the pool of easy money that fueled unicorn growth. Indian startups have found it difficult to raise new rounds, and when they do, valuations are often slashed.
There are still bright spots in the Indian startup ecosystem. Fintech, SaaS, and AI-based startups continue to attract capital, albeit at more measured valuations. The fintech sector is still poised for growth, as India's digital payment market is expected to grow to over $10 trillion by 2026.
Bejul Somaia, a partner at Lightspeed Venture Partners who pioneered the firms growth in India, told Bloomberg the current environment is a “hiccup” but he remains “optimistic” about India’s start-up scene. This week, Lightspeed led a $65 million Series D fundraising round for Qure.AI, a Mumbai-based start-up serving healthcare clients.
