More Unicorns in the making! India's billion-dollar club is set to grow

Swiggy, Byju's and, most recently, Policybazaar made headlines when they entered the unicorn club this year. In contrast, last year only one company - Infibeam - made it to this elite club of startups valued at over $1 billion. But things may get even better here on. According to The Economic Times, at least seven more companies are poised to gain the coveted title this year, doubling the size of the desi unicorn club to about 20 members in the bargain.

The unicorns-in-the-making hail from diverse sectors such as software, logistics and fintech, thereby widening the pool beyond online commerce and advertising models. The report added that among the more popular startups on this list are grocery e-tailer BigBasket, budget hotel chain Oyo Rooms, software-as-a-service (SaaS) company Freshworks, and tech-enabled logistics player Delhivery.  

These companies have leveraged on changing consumer habits, courtesy the mega bucks that Internet giants like Flipkart, Amazon India, Ola and Uber shelled out to encourage the shift to online transactions. Online payments processor BillDesk and Delhivery are prime beneficiaries of this change in consumer behaviour, and the ensuing ecommerce boom over the past 5 years.

Citing entrepreneurs the daily added that these companies have brought much-needed investor attention to sectors like SaaS, which has now become mainstream. "When the consumer internet story turned (sour) somewhere in the second half of 2015, SaaS suddenly became hot. Now also, people are focusing on SaaS as a segment even though you are seeing action back in consumer startups," Freshworks CEO Girish Mathrubootham told the daily.

India's newly-minted unicorns, in fact, differ from the club's older members in multiple ways. At least three of the current crop, Policybazaar, BillDesk and Pine Labs - all coincidentally in the fintech space - have already reached profitability. Several other startups, including Byju's and Delhivery, are also targeting profitability. In contrast, among the older unicorns, only data analytics company Mu Sigma was profitable when it joined the club. Mobile advertising firm In-Mobi, the country's first unicorn, only turned profitable last year.

The report added that the new unicorns have been able to build stronger moats because several of them operate in niche verticals where it is harder to build businesses due to regulatory and operational issues. Besides, some of them have been able to reach a scale that they are now facing global competition, unlike the previous unicorns. "The quality of revenues and the quality of these businesses are substantially better than some of the older businesses. The market has also moved a lot in terms of maturity and these businesses are far more sustainable," Vishal Gupta, MD at Bessemer Venture Partners, which has backed Swiggy and BigBasket, told the daily.

Where the companies significantly differ is the time they took to get to the $1 billion mark. Nearly four-year-old Swiggy is among India's fastest unicorns. On the other hand, BillDesk was founded 18 years ago and Pine Labs about 20 years ago.

Now for the bad news. According to the daily, the fate of about half of the unicorns from the previous batch of 10 hangs in balance. Online retailers Shopclues and Snapdeal, and online classifieds player Quikr have not raised fresh capital in the last 2-3 years, which has raised questions on their current worth. But all three startups told the daily that they are targeting profitability, even at the cost of growth so that they don't have to be dependent on external capital.

A big risk to startups is overcapitalisation, and that is exactly what some investors are reportedly worrying about now with global corporations such as China's Alibaba and Tencent, and Amazon, Facebook and Google rushing to win the India internet market.