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The start-up race can be a grueling marathon. Many a potential unicorn has dropped out of the $1 billion valuation race. Blame it on the funding winter or tightening of regulatory framework, 25 start-ups are out of the Ask Private Wealth Hurun India Future Unicorn Index 2024.
Only three start-ups including quick commerce Zepto, logistics start-up Porter and InCred Finance have got promoted to unicorn status with a valuation of $1 billion this year. Around five gazelles (start-ups that can become a unicorn in 3 years) and 20 cheetahs (potential unicorn in 5 years) have dropped out of the list this year.
The total number of unicorns in India on the list in India is 67 against 68 last year (The index considers only start-ups created after 2000). SaaS and HR tech start-up Darwinbox, which was a unicorn earlier, has got demoted to a gazelle. India’s future unicorns are currently valued at $58 billion.
Key factors
Most of the dropouts from the index were due to change in regulations especially in the fintech space with RBI restricting banks’ exposure to NBFCs with sharp focus on lending online.
Anas Rahman Junaid, MD and Chief Researcher, Hurun India, said amid a funding winter, inflated pre-2021 valuations and setbacks from companies such as Byju’s, the once golden start-up ecosystem now faces a critical turning point with 44 dropouts in the last two years.
The economic slowdown has posed challenges for specific companies, with 24 per cent of last year’s gazelles and cheetahs either falling off the list or downgraded. Hurun Research believes that these companies may no longer have the potential to become unicorns in three years given how tough it has become to raise capital.
Rajesh Saluja, Managing Director, ASK Private Wealth, said a transformative shift is in progress in the dynamic start-up landscape with high net worth investors and family offices now filling in the vacuum created by foreign funding.
There is an increasing focus on profitability and sustainable operating models, with 22 of the list entrants making profits in FY23, he said.
Potential start-ups
Interestingly, this year’s list features three potential unicorns from SpaceTech, 11 from Artificial Intelligence and 6 from the EV/Renewable Energy sectors.
Though start-ups in artificial intelligence, agritech, space tech and deep tech are fast emerging they are in nascent stage and face regulatory challenges but provide a good investment opportunity for investors looking for high-risk-high-return, he added.
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