Record number of unicorns in 2021 as race for such valuation takes longer

Unicorns, contrary to popular perception, took slightly longer than in previous years to get to a billion-dollar valuation in 2021. The record-breaking year saw more than 40 unicorns, shows the data from start-up data provider Tracxn Technologies.

This was the highest number in the data, which goes back over a decade. The previous high was 17 in 2020. The median amount of time a start-up takes to be worth a billion dollars, called a unicorn because of how rare the event is, is counted in years though there are exceptions to the rule.

It took the median 2021 start-up 65 months from the time of its series A funding to get to unicorn status, shows a Business Standard analysis of the Tracxn data. Series A funding typically refers to the first time a sufficiently established start-up taps formal funding outside of individuals or friends and family. The time to unicorn status is not too different from previous years (see chart 1).

The median time taken in the five years before 2021 was 60 months. It was as much as 79 months in 2019 before the pandemic. The exceptions this year include companies like blue-collar job portal Apna, which got there in 12 months, and cryptocurrency platform CoinSwitch Kuber, which managed it in eight months. Both these start-ups are based out of Bengaluru.

Karnataka has emerged the biggest source of start-ups in India. It accounted for 36 of the 96 start-ups for which Tracxn had data. Next is Maharashtra, which accounted for 21. Haryana is third with 18 (see chart 2).

All of the 18 unicorns in Haryana are based out of Gurugram. There is a similar city concentration in other major states as well. All 36 of Karnataka’s start-ups that have achieved unicorn status are in Bengaluru. Maharashtra is slightly more diversified though the tilt is in favour of Mumbai, which has around 13. Pune accounts for seven.

Many enterprises are based out of more than one location, one of them abroad. Business Standard considered the Indian location in this analysis.

A number of start-ups like Paytm and Nykaa have gone on to list on the stock exchange. These could well lead to the beginning of another favourable trend for investors, suggested a September 2021 Global Strategy Paper from financial services group Goldman Sachs. The internet ecosystem, availability of private capital, and a favourable regulatory environment contributed to the surge in unicorns, according to the report authored by analysts including Sunil Koul, Timothy Moe, Kinger Lau, Alvin So, Peter Lau, and John Kwon.

“Investors can find attractive return opportunities, as long as they don’t overpay for growth, as evidenced by significant outperformance of China new economy stocks over the past decade,” it said.