The continuing fund drought coupled with a slew of regulatory actions have seen a massive drop in the number of future unicorns, with as many as 25 startups slipping out of the list in 2023, shows an industry report.
As a result, the number of unicorns -- startups valued at over $1 billion -- slipped by one to 67 in 2023. The list had grown by three to 68 in 2022, according to a report by Hurun India which brings out the list.
There were "record dropouts" in future unicorns at 25, including five startups valued at over $ 500 million that were likely to turn unicorn in three years (called gazelles) and 20 valued at over $200 million likely to turn unicorn in five years (called cheetahs), the report said.
Currently the country is home to 67 unicorns, 46 gazelles and 106 cheetahs. Rajesh Saluja, the chief executive of Ask Private Wealth, which coauthored the report, said startup valuations were hit by the ongoing funding winter, which began with the February 2022 invasion of Ukraine by Russia, leading to a deep slowdown in bets as the higher interest rates pulls investors to fixed income.
There were also other issues, including regulatory actions by financial sector watchdogs, which put question marks over some fintechs' valuations like in the buy now pay later segment and also growing insistence on profitability by the external investors, he said.
Hurun India’s Anas Rahman Junaid said the uneven consumption growth may also have impacted valuations in some cases.
Venture funds are preferring to hold on to cash due to lack of sufficient opportunities, Saluja said, adding the industry is witnessing only 35-40 percent of committed amounts being drawn down. However, higher play by high net worth and ultra high net worth families has helped minimise the impact of the funding winter on the ecosystem, Saluja said, adding that 2023 saw only $8 billion inflows in startups as against $38 billion in 2022. Peak XVPartners continues to be the most active investor in the list with 47 bets, while Anand Chandrasekaran is the leading angel investor with stakes in 20 future unicorns, it said.
The report said 35 domestic future unicorns have overseas headquarters, which includes 31 in the US, two in Singapore and one each in England and Vietnam.
Bengaluru continues to be the future unicorn capital of the country, being home to 46 of them, followed by Delhi-NCR at 29 and 19 in Mumbai.