The Rise of Indian Unicorns

 The year 2021 has been a blockbuster year for the Indian startup ecosystem, which has led to

their landmark growth. This, in turn, has transformed startups like UpGrad, PharmEasy, and

Cred into a Unicorn in just a couple of years or, in some cases, even in months. This year alone,

India has witnessed 42 startups transforming themselves into Unicorns. As a result, India has

now displaced the UK to become the 3rd top country to host Unicorns, behind China and the

USA. However, not everyone knows what a Unicorn is. So, lets take a brief look at what is a

Unicorn and how India is picking up pace in creating more of them.

What is a Unicorn?

Unicorn is a term used in the venture capital industry to describe a privately held startup

company with a valuation of over $1 billion. The reason a company is called a Unicorn is that

just like the Unicorn (a fictional creature) these companies are rare. Today India has about 79 of

these rare Unicorns of which 42 were born in 2021 itself. This means that there was one

Unicorn born every ninth day. These Unicorns range from platforms to sell used cars, to crypto

exchanges, health, and fintech firms. Indian Unicorns are together worth $260 billion. Programs

like #startupindia by the Government of India, investments by aspiring Indian millennials, FDI’s

from countries like Japan and the USA, and the ongoing coronavirus pandemic are some of the

factors that have contributed to these unprecedented valuations.

Lets take a brief look at three of the rare Indian Unicorns.

CRED

Cred, an Indian fintech company, based in Bangalore, was founded in 2018 by Kunal Shah.

Cred app& its main feature is reward-based credit card payments. Cred is probably the fastest

startup to turn into a Unicorn in 2021. As of April 2021, Cred is estimated to have a valuation of

$2.2 billion. Much of this success is due to Cred’s business model.

Today, in our forever busy lives, we often forget to pay our monthly house rent and EMI of cars,

leading to very hefty late payment charges by banks. These late payment charges, together with

the hidden charges which banks impose on their consumers are the single major source of their

revenue. This is exactly where Cred kicks in - making it easy and convenient to make credit

card payments on time.

As a business, Cred targets particularly wealthy individuals who have a credit score of more

than 750 points. Cred focuses on targeting Generation Y i.e. people in the age group of 25 to 40

years, particularly people in their 30s. That's the reason, Cred’s creative marketing is focused

on people born in the 80s and 90s.

Creating ads featuring Rahul Dravid, Kumar Sanu and Govinda has increased their consumer

base while keeping their profits minimum.

Cred like many other startups followed the marketing strategy of Reliance Jio. This involves

collecting funds and spending them on creative marketing and giving exclusive offers, in order

to increase their consumer base. This may not make a company profitable straight away, but

will surely raise its overall revenue. This is exactly what Cred did. In 2020, Cred suffered a loss

of Rs 360 Crores but was still able to become a Unicorn in April 2021.

NYKAA

Nykaa is an Indian e-commerce company, founded by Falguni Nayar in 2012 and

headquartered in Mumbai. It sells beauty, wellness, and fashion products across websites,

mobile apps, and 76 offline stores. In 2020, it became the first Indian Unicorn startup headed by

a woman. The company retails over 2,000 brands and 200,000 products across its platforms.

Nykaa came into India when most of the beauty and self-care companies were planning to leave

the Indian market. At the time, beauty businesses in India were underdeveloped. Neither stores

nor parlors had a full offering from one single brand.

The thing that distinguishes Nykaa from other cosmetic companies like Myntra, is its abundant

transparency. Nykaa offers an incredible consumer experience by being an integral part of their

shopping experience. Besides this, Nykaa adopted the inventory model of e-commerce rather

than the marketplace model adopted by companies like Amazon and Flipkart, resulting in its

massive profits.

Nykaa has reported a profit of INR 61.9 Cr in FY21. In October 2021, Nykaa opened its initial

public offering (IPO) with a price band of Rs 1,085-1,125 per share. The IPO was

oversubscribed 81.78 times, raising ₹5,352 crores (US$710 million) at a valuation of US$7.4

billion.

Cars24

Cars24 is an online used car marketplace headquartered in Gurugram, Haryana. The company

was founded by Vikram Chopra, Mehul Agarwal, Gajendra Jangid, and Ruchit Agarwal in 2015 to

buy and sell used cars.

India has always been a price-conscious market. The value of a new car depreciates by about

30% in the first year of purchase itself. This makes buying a used car a better-value-for-money

option. Hence, the rise of the used car segment in the Indian market is booming.

Today the used car business is a $20 billion-market in India which is growing at 25% every year.

Cars24 raised US$200 million in a Series E round of funding in 2020 and became a Unicorn

startup. Today Cars24 has a valuation of $3.3 billion.

The startup ecosystem of India is skyrocketing. By 2023, India is expected to have more than

100 unicorns. Startups like Byju’s, Paytm, and Flipkart have already transformed themselves

from Unicorns to Decacorns (a company with a valuation of more than $10 billion). It will not be

long before startups like Cred, Nykaa, and Cars24 will for sure reach this milestone as well.

~ Yadnyesh Salvi (FYBA)