For representative purposes (file photo)
A continued lack of funding and a wave of regulatory measures have led to a significant drop in the number of future unicorns, with as many as 25 startups dropping off the list in 2023, according to industry reports.
As a result, the number of unicorns (startups valued at more than $1 billion) will fall by one to 67 in 2023. The list will grow by three to 68 in 2022, according to a report by Hurun India, which released the list.
The report found a “record dropout” of 25 future unicorns, including five startups valued at $500 million or more that were likely to become unicorns within three years (dubbed Gazelles) and 20 startups valued at $200 million or more that were likely to become unicorns within five years (dubbed Cheetahs).
Ukraine currently has 67 unicorns, 46 gazelles and 106 cheetahs.Rajesh Saluja, CEO of Ask Private Wealth and co-author of the report, said startup valuations have been hit by the ongoing fundraising winter that began with Russia’s invasion of Ukraine in February 2022, with rising interest rates drawing investors to bonds, slowing investment significantly.
There are also other issues such as regulatory action by financial sector regulators that have raised question marks over the valuation of fintech companies such as the pay later segment, as well as increased focus on profitability by external investors, he said.
Anas Rahman Junaid of Hurun India said uneven consumption growth could also be affecting valuations in some cases.
Venture funds prefer to hold onto their cash due to lack of opportunities, Saluja said, adding that the industry has only drawn down 35-40% of the amount pledged. However, increased activity by high net worth and ultra-high net worth families has ensured that the funding winter has minimal impact on the ecosystem, Saluja said, adding that inflows into startups are expected to be just $8 billion in 2023, compared to $38 billion in 2022. Peak XV Partners remains the most active investor on the list with 47 investments, while Anand Chandrasekaran said he is a leading angel investor with investments in 20 future unicorns.
According to the report, 35 of China’s future unicorn companies are headquartered overseas, including 31 in the United States, two in Singapore, one each in the United Kingdom and Vietnam.
Bengaluru continues to be India’s future unicorn capital with 46 unicorns, followed by Delhi NCR at 29th and Mumbai at 19th.
