Venture capital dealmaking for India’s unicorns has slowed significantly, casting doubts over the future health of the country’s herd.
The number of VC-backed companies valued at over $1 billion in India swelled significantly over the past decade, with just seven recorded in 2015 compared to 64 this year, according to PitchBook’s Q3 2024 Checking In on India’s Unicorns analyst note. The country now stands only behind the US and China for the total number of unicorns but the growth rate of the herd has plateaued.
With the slowdown in VC dealmaking, Indian unicorns have come under increased pressure as they try to maintain their valuations.
Only nine companies worth over $1 billion raised capital in the first half of 2024. Currently, India’s unicorns are on track for the lowest level of dealmaking since 2018. Among the deals are ecommerce platform Flipkart’s $1 billion investment led by Walmart and grocery delivery company Zepto’s $665 million Series F featuring backers including DST Global and Nexus Venture Partners.
In terms of deal value, India’s unicorns secured $1.1 billion in the first half, equivalent to 15.2% of the overall capital raised by startups in H1 2024. Last year, they received nearly 70% of overall deal value.
With less capital in the market overall, unicorns are struggling to raise sufficient funding and many may be running out of cash. The median time between VC funding rounds for unicorn deals has been on a steep incline in recent years. Currently, it stands at 1.9 years compared to just 6 months in 2021.
Exit activity for these companies has also been muted, with no exits recorded this year and just one in 2023. With a lack of exit options and a competitive dealmaking environment, many of India’s unicorns may be facing the prospect of down rounds to secure capital.
There are, however, some positive signs for the future of India’s unicorn herd. India’s economy is one of the fastest growing globally, and it is expected to become the third largest by GDP within the next decade, according to the IMF. With 38.5% of the country’s unicorns targeting consumers, these companies are well-placed to capture the tailwinds associated with a growing economy.
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