India created nine unicorns in 2019 which includes online grocer BigBasket, fantasy gaming platform Dream11, logistics startup Delhivery, eyewear retailer Lenskart, trucking logistics firm Rivigo, cloud-based contract management firm Icertis, data protection and management firm Druva, Ola Electric, the electric vehicle arm spun off from the ride-hailing platform, and Zoho, a bootstrapped business and productivity software firm. At present, there are 24 unicorns in India and a potential 52 more unicorns in the works, according to a report released by NASSCOM in November 2019.
Some of the potential unicorn startups to lookout for in 2020 include software and robotics platform GreyOrange, payments provider Pine Labs, online car marketplace CarDekho, health tech platform Practo, online furniture company UrbanLadder, online grocer Grofers, fintech start-up LendingKart and online truck aggregator Blackbuck.
Road for exits
Even though the number of names in India’s unicorn club doubled in the past two years, the biggest unicorns namely—Paytm, Oyo, Ola, Byju’s, Swiggy and Zomato—are yet to lay down a concrete exit route for its existing investors. While talks of IPOs resounded through the year across Softbank-backed Ola and Oyo, none of India’s unicorns meet public listing guidelines in India which require companies to return profits for at least three years. One of the notable exits in 2019 include e-commerce startup Shopclues’ fire sale to Singapore’s Qoo10 Pte Ltd which also saw Shopclues’ valuation come down drastically from $1 billion in 2016 to merely $80 million post the deal.
According to at least four startup investors that Mint spoke with the only possible exit routes for unicorn investors in the near term is via secondary exit routes. "2019 saw some interesting exit options through founder buy-back emerge for early-stage backers of unicorns. But they seem more like an exception than a norm. I expect secondaries to be the primary exit option in 2020. IPOs seem possible for global SaaS companies," said Ganapathy Venugopal, co-founder and CEO of Axilor Ventures, in an e-mailed response.
“In the short to medium term, a period of three years or so, we expect a lot more secondary exits. If we take a three to six or seven-year period, I truly believe that India will see a number of unicorns and this is anywhere between 10-20 going IPO in the Indian stock markets," added Sudhir Sethi, founder and Chairman of Chiratae Ventures India Advisors.
Deals and acquisition outlook
Some of the biggest funding rounds in 2019 include Oyo Rooms’ $1.5 billion fundraise from founder Ritesh Agarwal’s Cayman Islands entity RA Holdings, SoftBank, among others, and Paytm’s $1-billion Series G round round led by T Rowe Price, SoftBank and Alibaba. Additionally, in October 2019, B2B commerce marketplace Udaan also outgrew its competitors to raise $585 million in a Series D round from a clutch of investors such as Altimeter Capital, Footpath Ventures, and others. Udaan was also pegged as the fastest brand to become a unicorn in 2018 when it raised $225 million led by DST Global and Lightspeed in September 2018.
Sudhir Sethi of Chiratae Ventures told Mint, over phone, that startup investors are expected to increase the pace of investing in early-stage companies in 2020 since many investors now have experience in producing unicorns. However, Indian unicorns are yet to make a global brand appeal in segments they operate, barring examples like hotel aggregator Oyo, and cab-hailing platform Ola has already established an operation base in multiple new countries. But investors point out that when unicorn firms go abroad, their investors are also in turn shifting focus abroad.
“Since our (Chiratae portfolio) companies are going global, last year we changed our brand to an Indian brand going global. By March we are opening a US office to support our global companies. With companies rapidly scaling, the demand on the VC to value add is high," added Sethi.
Layoffs and job outlook
In spite of stellar funding rounds and big hires, unicorn startups struggled to keep their costs under check forcing them to initiate layoffs across different teams. Apart from unicorns, some of the leading startups in India such as UrbanLadder and Foodpanda (owned by Ola) also began cutting jobs for reasons ranging from restructuring of operations, to reducing costs and fund crunch.
Around 3,200 employees were laid off from their roles across 6 different unicorns in 2019, according to a Mint analysis. Big brands including Quikr, Ola, Oyo, Zomato, and Paytm have each laid off at least 500 employees in 2019, even as these startups continue to hire across several new roles. Apart from this, Surface transport company Rivigo also laid off around 100 employees in 2019.
Nevertheless, with fund inflow into tech startups continuing at a brisk pace, startup hiring will not take hit in 2020. Analysts and headhunters tracking startups say that tech roles are back in demand. These include full-stack developers with knowledge of both front- and back-end programming, digital marketers, data scientists, and IoT (Internet of Things) hardware developers.
A Mint analysis of the top 16 tech unicorns paints a worrying picture when it comes to their financial health. Collective net losses posted by top 16 unicorns in India increased by 80% year-on-year in FY 2019, when compared to FY 2018. In FY18 top 16 unicorns posted collective losses of ₹15,171.60 crore, up from around ₹8,424 crore losses posted in FY18.
Collective revenues from 16 unicorns, however, increased by 86% YoY in FY19 totaling to ₹23,119 crore, which is up from around ₹12,425 crore in collective revenues reported in FY18. Total expenses across the 16 tech unicorns swelled by 77% YoY in FY19 totaling to around ₹39,492 crore, compared to ₹22,314.81 crore in FY18.