‘A unicorn per se is not a good role model,' says Anand Lunia of India Quotient

Veteran investor Anand Lunia is not a fan of the unicorn benchmark that has come to define India’s start-up ecosystem of late. As the Founding Partner of India Quotient, an early-stage VC fund, Lunia tells Business Today, “Zombie unicorns suck up resources and delay the feedback loop. Funds don’t write them off. Founders don’t shut them down. We cannot analyze them as failures because well, they are [still] running.”

Now, what are ‘zombie unicorns’ - a unique coinage by investors? These are companies that have touched the $1-billion valuation mark but have no proper business models and have stopped growing or hiring people. The companies are still operational on paper but are likely to become irrelevant sooner than later.

Which are India’s zombie unicorns, you wonder? 

Without taking any names, Lunia shares, “There are several companies in commerce, education, and B2B marketplaces that have no fundamental strength.”

India is home to over 100 unicorns today, making it the world’s third-largest start-up economy after the US and China. But Lunia reckons, “A unicorn per se is not a good role model”. “The whole ecosystem was designed just to raise money. It was successful but the goals were wrong. We need the right role models,” he says.

India Quotient, which has been investing since 2013, has had multiple successes in the form of ShareChat, SUGAR Cosmetics, LendingKart, Pagarbook, Roposo, WebEngage, and so on. But a bunch of its portfolio start-ups failed to survive too.

The nature of venture-funded growth is such that at the very first instance of a capital crunch, companies find it tough to stay afloat. For them, Lunia advises, “There is no need to burn money for growth. I strongly believe that low burn leads to focus, and that leads to high-quality growth. It’s the deep pocket investors who pose this false construct of trade-off between growth and burn.”

The investor is of the opinion that Indian start-ups must start benchmarking themselves on things like capital efficiency and revenue per employee. “Funding may take a while to come, and even then investors may seek only profitable companies. Slow growth with low burn is not an option either. Founders need to find both growth and efficiency and if that’s not likely, they should exit while they have some runway left,” he explains.

So, what bets would India Quotient be taking this year? 

“We like tech and software layers on top of mobility or agritech or AI. We also feel India-focused B2B software and marketplaces will become mainstream now,” Lunia adds.

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