In April 2015, the Indian unicorn club—start-ups with a valuation over a billion dollars—got two new members: Paytm and Zomato. They joined the earlier elite of Flipkart, Snapdeal, Ola, Mu Sigma and InMobi, among others.
2016 turned out to be different, as international competitors, especially Amazon and Uber, got more aggressive in India. Amazon recently launched Prime Video and Uber CEO Travis Kalanick joked that he would apply for Indian citizenship, even as Indian entrepreneurs complained about capital dumping from their competitors abroad. Zomato, a restaurant search service with global ambitions, and Flipkart, one of India’s earliest to breach the $1 billion club, saw investors such as Morgan Stanley and HSBC Securities lower their valuations (see charts 1 and 2).
The concern about a low ratio of online shoppers/spenders to Internet users loomed large, and demand for online services were not picking up pace the way fund houses had hoped. Of course, Indian companies were not the only ones drawing flak. Global companies also saw markdowns. Investors’ wariness reflected in their average investments in 2016 (see chart 3).