The great Indian unicorn conundrum: High valuations and higher losses

Companies get investors' financing though many of them not on path to profitability

After announcing plans to lay off five per cent of its workforce (about 2,500 employees), edtech unicorn Byju’s has raised $250 million from existing investors. An analysis shows that the top 10 unicorns raised $10.1 billion in funding in 2021 — 3x more than the amount raised in 2019. Byju’s accounted for 30 per cent share. 

This year’s fund raises already exceed the 2019 funding number. Byju’s valuation did not change in this round, but its valuation had jumped 290.4 per cent over the 2019 figure. 

However, an increase in valuations does not translate into higher profitability. 

A Business Standard analysis shows that as valuations increased, five out of nine unicorns for which data was available, recorded higher losses. Byju’s losses widened 515 times from Rs 8.9 crore in 2018-19 to Rs 4,588 crore in 2020-21.