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24/07/2021 at 11:51 AM

Dr Manas R Das

In the finance literature, the term “Unicorn” is used in the venture capital industry. It describes an unlisted start-up valued privately at a billion dollars or more. The venture capitalist Aileen Lee, founder of Cowboy VC, a seed-stage venture capital fund based in Palo Alto, California, coined the term in 2013 to highlight the rarity of such high-value companies.

Since then, the term has been widely used to refer to start-ups in the technology, mobile technology and information technology sectors – usually at the intersection of all three – with very high valuations.

The value of unicorns is generally based on how investors and venture capitalists foresee these companies to grow. Their valuations may not necessarily be based on their financial performance but on the talent and innovative ideas they possess. In fact, many of these companies, at the beginning, hardly generate any profits, e.g., Zomato which is still in losses.

The main characteristics of ‘unicorns’ are:

  • They partner with social media like Facebook, Twitter and Instagram to help get their message across.
  • They are customer-centric businesses (“Customer is the king”). Customer feedback is ‘oil’ for them.
  • Their mindset is to reach out to the entire world and at a rapid pace.
  • They are multi-discipline and multi-cultural organisations. Thus, they benefit from a cosmopolitan management.
  • For them, success is laced with high degree of uncertainty on a daily basis.

As per statista.com, in April 2021, there were 593 unicorns in 29 countries with USA at 288 and China at 133, thus together accounting for 71%. India was the third highest in the list with 32 unicorns. As of June 2021, the global total increased to more than 700 according to CB Insights.

Some familiar US-based unicorns include Uber, Airbnb, SpaceX, Palantir Technologies, WeWork and Pinterest. Some of the Chinese ones are Didi Chuxing, Xiaomi, China Internet Plus Holding (Meituan Dianping) and Lu.com.

Indian Scene

Just 12 unicorns were born in the entire of 2020, but that itself was the highest ever for a year in India. The year 2021 has already seen the birth of 16 unicorns in India.

In India, the unicorns cover a wide range of services. The older Indian unicorns include Flipkart (now sold to Walmart), Ola Cabs (ride sharing) and Byju’s (education). The newcomers of 2021 include Cred (fintech), ShareChat (social media, mainly regional languages), Digit (insurance), Groww (wealth management), GupShup (messaging), Meesho (social commerce), PharmEasy (e-pharmacy), Innovaccer (healthcare), Infra.Market (materials and logistics for real estate), Chargebee (automated subscription billing and payments), Urban Company (home maintenance and alteration), Moglix (industrial tools), MindTickle (software as a service), Firstcry (e-commerce), Zeta (fintech), BrowserStack (software as a service) and BlackBuck (logistics tech).

Half a dozen Indian start-ups raised USD 1.55 billion to enter the unicorn club between April 5 and April 9, 2021, in what has been a record-setting week of funding in the domestic new age Internet ecosystem.

The success rate for start-ups to become unicorns is very low, and that is why unicorns are so rare. It is not the capital that ensures success but talent and innovative ideas define the existence and success of unicorns. That’s new age capitalism.

About the Author:

Dr. Manas R. Das is a former senior economist of State Bank of India. He has over 30 years of experience as an economist in two large commercial banks. Academically, he is a gold medalist in Bachelor of Arts with Economics Honours from Utkal University, followed by Master’s in Economics from Delhi School of Economics and Doctorate in Economics from Gokhale Institute of Politics and Economics. He is also a Certified Associate of the Indian Institute of Bankers. He has won several awards, besides being a prolific writer.

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