The unicorns that exist in the real world
What comes to your mind when you hear of unicorn? A mythical horse with a single spiralled horn projecting from its forehead. But that’s not all, is it? We associate unicorns with magic, colour and everything that is quintessentially good and positive. But what if we told you that these are not confined to the mythical world of imagination? A unicorn exists in the economics fraternity too where its connotation is entirely different. Yes, you read that right. When a start-up reaches the valuation of $1 billion or more, it is termed as a unicorn. Recently, Prime Minister Narendra Modi announced that India has touched the milestone of 100 unicorns valued way past $300 billion. While this is definitely a great news for the country’s growing start-up ecosystem, here’s a bird’s eye view of these ‘real-life unicorns.
What is a unicorn start-up?
As already mentioned, a start-up company with a valuation of $1 billion or more is a unicorn. However, this isn’t all. These start-ups should be privately held and backed by venture capitalists, investors who specifically invest in start-ups and expect higher returns despite the serious risks involved. The valuation of a unicorn is, however, not based on its current financial performance. It depends on the perception that investors and venture capitalists have about its growth and profit-making potential.
Who first used the term unicorn for start-ups?
In the year 2013, American venture capitalist Aileen Lee, for the first time, used the term ‘unicorn’ in the context of start-ups. Back then, it was a rare feat for start-ups to touch the $1 billion mark and unicorns are associated with rarity. Lee had laid down the term in her article titled ‘Welcome to the Unicorn Club: Learning from Billion-Dollar Startups' published in TechCrunch, a digital American newspaper targeted towards high tech and start-up companies.
How rare is this unicorn feat?
When Lee conducted her assessment, only 39 US start-ups (the ones established 2003 onwards) were fortunate enough to reach the ‘unicorn’ feat. It was a negligible percentage (0.07) considering that the start-up ecosystem was on a high. However, since then, start-ups have come a long way, with more of them earning the prestigious the unicorn tag. This is because more private investors and market funders have emerged over the years. A business analytics platform, CB Insights, recently revealed that as of 30th March 2022, there were as many as 1068 unicorn start-ups worldwide. Out of them, 519 were conceived in the previous year alone. They managed to reach a valuation of 1 billion and above in less than a year. In fact, the world crossed the 1000-unicorn landmark of 1000 unicorns at the start of this year.
The Indian scenario
According to several estimates, India saw the maximum emergence of unicorn start-ups during the pandemic. In fact, the real numbers stand at: 44 unicorns in 2021, 11 in 2020 and 7 in 2019. These estimates have been revealed by Invest India, a start-up initiative by the union government. Experts believe that this was a result of the introduction of National Investment Promotion and Facilitation Agency by the Indian government. It’s a non-profit investment venture set up under the Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry. Sources reveal that between 2015 and 2021, India’s start-up ecosystem has grown a lot, almost nine times in terms of investors and seven times in terms of funding.