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India's Startup Dream on Hold? Record-Breaking Unicorn Dropout in 2024

India's startup scene is booming, right? Not so fast! A record number of startups are dropping off the future unicorn list. Are valuations inflated or is it funding winters? Find out which startups are defying the odds to reach unicorn status. Read on!

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Swati Dayal
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The Unicorn Exodus

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India's startup scene is experiencing a period of churn, with a record 25 companies dropping off the Hurun India Future Unicorn Index 2024. This reflects a broader trend of funding slowdown and valuation adjustments within the industry. The index reveals a challenging year for startups, with only three achieving unicorn status: Zepto, InCred Finance, and Porter.

Hurun Report

Morover, as many as 35 Indian Future Unicorns have overseas headquarters. 31 are in the Unites States of America, 2 in Singapore and 1 each in the UK and Vietnam.

Also Read: Can Budget Lure Back Startups? What It Takes for Ghar Wapsi of Titans?

Unicorn Dream Deferred

The Index paints a picture of a challenging year for startups, with a significant decline in valuations. 25 future unicorns were dropped out of  the list, with five being previously classified as "gazelles" (high-growth startups valued between $100 million and $500 million) and 20 as "cheetahs" (promising startups below $100 million). Even established players like Darwinbox, once a unicorn, have been reclassified as gazelles, highlighting the sector's volatility.

New Unicorns Emerge Amidst Turbulence

Despite the challenging environment, three startups crossed the $1 billion valuation threshold this year. Zepto, a quick commerce startup, InCred Finance, a fintech company, and Porter, a logistics platform, achieved unicorn status, showcasing their resilience and strong market positioning.

Hurun Index 2

Index Composition and Sector Insights

The Hurun India Future Unicorn Index categorizes startups into unicorns, gazelles, and cheetahs. This year, the index identified 152 future unicorns from 31 cities, predominantly established around 2015. The report reveals that 82% of these startups offer software and services, with only 18% selling physical products. Additionally, 44% cater to businesses, while 56% target consumers.

Financial services, business management solutions, education, and healthcare are the most represented sectors among future unicorns.

Rajesh Saluja, CEO and MD of ASK Private Wealth, highlighted the increasing focus on profitability and sustainable models, noting that 22 list entrants reported profits in FY23.

“There is an increasing focus on profitability and sustainable operating models, with 22 of the list entrants making profits in FY23. More than 1.5 lakh people are employed by Future Unicorns. These are green shoots of tangible impact metrics,” Rajesh Saluja said.

Industry-Wide Challenges and Emerging Trends

Anas Rahman Junaid, MD and chief researcher at Hurun India, emphasized the industry's critical juncture amid funding challenges and valuation corrections. The index saw 44 companies drop out but welcomed 38 new entrants, indicating a dynamic and evolving landscape.

“The ASK Private Wealth Hurun India Future Unicorn Index provides essential insights into the current state and future prospects of India's startup ecosystem. Amid a funding winter, inflated pre-2021 valuations, and setbacks from companies like Byju's, the once golden startup ecosystem now faces a critical turning point. Despite 44 companies dropping out of the index over the past year, this year's index welcomes 38 new entrants,” said Junaid.

Notable promotions within the index include ixigo, an online travel aggregator, which bypassed gazelle status to go public with a 48% premium. With a market cap of Rs 6,000 crore ($700 million), ixigo is on the path to achieving a billion-dollar valuation.

According to the research, some of the notable promotions in the index include online travel aggregator ixigo, a former cheetah, that went public with a 48 percent premium. “In 2022, ixigo was predicted to become a unicorn within five years, and it has now leaped directly to an IPO, bypassing the gazelle status. With a market cap of Rs 6,000 crore ($700 million), ixigo is on track for a billion-dollar valuation. Around 10 cheetahs were promoted to gazelles," it said.

Sector Highlights: Aerospace and AI

Aerospace emerged as a promising sector, with startups in this field attracting $160 million in funding. AI startups received a combined $1.6 billion, and EV companies secured $1.2 billion. Junaid pointed out the significant funding gap in aerospace, underscoring its growth potential.
Education and Healthcare are the sectors disrupted most by the future unicorns. 

Key Statistics and Insights

  • Unicorn Count: India is currently home to 67 unicorns, 46 gazelles, and 106 cheetahs.
  • Record Dropouts: This year saw a record 25 future unicorns exit the list.
  • New Entrants: 38 new startups entered the list, including 7 gazelles and 31 cheetahs.
  • Promotions: 14 startups were promoted, with Porter skipping the gazelle stage to join the unicorn club directly.

Hurun Index

Investment Trends and Regional Highlights

Bengaluru remains the future unicorn capital of India, housing 46 probable unicorns, followed by Delhi NCR (29) and Mumbai (19). The index also highlights the role of key investors, with Peak XV Partners and Accel leading in investments.

Co-founders dominate the startup scene, with 80% of future unicorns having more than one founder. Notably, 30 startups are led by solo founders. Bounce, an EV startup, stands out with the largest ESOP pool, highlighting its employee-centric approach.

A Transforming Ecosystem

The Hurun India Future Unicorn Index 2024 underscores the transformation within India's startup ecosystem amidst economic pressures and evolving market dynamics. As startups navigate these challenges, the focus on profitability and sustainable growth models becomes ever more critical. The emerging trends and sector highlights offer a glimpse into the future directions of India's vibrant startup landscape.

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