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India currently stands third in the global list of the number of companies that have attained unicorn status. While fintech and e-commerce companies have led this phenomenon and remained at the forefront of establishing the unicorn ecosystem, other sectors such as edtech, food delivery and mobility have also made significant contributions.

The year 2021 has witnessed the emergence of 28 new unicorns till date, averaging three unicorns per month and the number includes 10 new unicorns in the edtech and fintech sectors, equivalent to the past three years combined.

What are the learnings for minicorns? New-age startups should devise a customer-centric business model. They should identify and define target customer segments and create products that bring solutions to customers’ problems. Through proper branding and strategy, they should make sure that this value proposition reaches the end-user.

What brings startups closer to success is the execution and customer acquisition strategy, where all the action occurs. For example, Byju’s is used by one out of every three children in India. The primary reason for the increasing customer base is its efficiently executed marketing strategies and effective customer acquisition channels such as feet-on-street.

Notably, technology has played a key role in the making of pioneer business models. Most of the unicorns have leveraged technology in all possible ways—from refining internal organizational processes to enhancing the value proposition for their customers.

New-age unicorns such as Digit Insurance (online insurance company), Zerodha (making stock trading easy and taking it to the masses) and Byju’s (pioneer in digital learning in the K-12 segment) have gained substantially. Minicorns can judiciously take cues from unicorns in understanding the ecosystem and building a business model that adds value while being sustainable.

The promoters are often caught between managing their core business and raising funds for expansion. As fundraising is crucial for business growth and demands careful planning of multiple rounds and equity distribution, minicorns need to pitch their business models with due diligence to gain considerable traction from venture capitalists (VCs), meticulously focusing on prospects and growth plans.

VCs are actively looking for investment opportunities in early-stage startups. They possess the selection ability to effectively screen startups having a higher potential to succeed. VCs primarily look for a mindset alignment with promoters and companies where they, as investors, can add value by leveraging their industry experience, expertise, network and reputation.

In edtech, the early childhood education segment and co-curricular activity segments have recently gained much traction from the investor community. Such segments are fairly expected to give rise to a unicorn in the future, given their innovative solutions and increasing demand.

Fintech valuations remained very high in the first half of 2021, as investors perceived the space as attractive and well-performing. It primarily drove the explosion of unicorn births in the first half of the year. The segments concerning insurance, neo-banking and investment technology are among the competent ones in becoming future unicorns of the country.

Indian startups have raised more VC funding in the first half of 2021 than in the whole of 2020. According to data from Venture Intelligence, $12.1 billion of VC investments have flowed into Indian startups so far in 2021, compared to $11.1 billion in all of 2020.

India almost matched its total fintech investment of $2.7 billion in 2020, with $2 billion in investment in the first half of 2021. An increasing number of business models are now focusing on the distribution and aggregation of financial services products, as observed in seemingly significant traction across insurtech and wealthtech segments.

Today, more fintechs are embracing ecosystem models to act as a one-stop shop for customers, with an increased focus on customized products across lending, insurance, wealth management, etc., for millennials.

Amit Ratanpal is founder and MD of BLinC Invest.

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