Funding winter impact: India added half the number of unicorns in 2022 compared to year before

‘Twas a year of humbling lows after a year of dizzying highs. 2022 saw India add just 22 unicorns (privately-held billion-dollar companies), down 51 per cent from the 46 it had added in 2021, according to Tracxn’s annual funding report. Out of this, just four unicorns were added in the second half of the year, as the ongoing funding winter pinched deeper.

Interestingly, no unicorns were added in the last quarter (October-December) of 2022 and in the month of April. Ironically, April 2021 saw India minting 6 unicorns in 7 days, in what was later dubbed as the ‘Unicorn Week’. “Rising interest rates and fears of global recession have led to investors becoming more risk-averse, continually slowing down the funding momentum in the Indian start-up ecosystem. The funding winter, which began in Q4 of 2021, will persist in 2023 as well,” Neha Singh, Co-Founder, Tracxn, said in a statement.

Despite half the number of new unicorns added last year, their cumulative valuation saw a jump of 16 per cent to $18.8 billion over the year before. The average Indian start-up took 5.1 years from its Series A to unicorn round, which is slightly higher than the global average of 4.4 years. Even the number of investors on the cap table of Indian unicorns are more. Enterprise applications, fintech and retail were the top three funded sectors in 2022.

The 22 companies that breached the $1 billion valuation last year include Fractal, LEAD School, DarwinBox, DealShare, LivSpace, ElasticRun, XpressBees, Uniphore, Hasura, Yubi, Amagi, CommerceIQ, Oxyzo, Games 24X7, Open, PhysicsWallah, Purplle, LeadSquared, OneCard, 5ire, ShipRocket, and Mobilo Diagnostics. Bangalore accounted for 7 of these unicorns, while Mumbai and Pune followed with 4 and 3 respectively.

The year was marked by a 35 per cent drop to $24.7 billion in venture capital investments. “The significant drop in funding is attributed to a decline in late-stage investments, which fell by 45 per cent from $29.3 billion in Jan-Nov 2021 to $16.1 billion for the same period in 2022,” Tracxn revealed in its report. Even the total number of deals fell by 30 per cent in 2022 compared to the year before.

“Although we are currently experiencing a slump, the situation is prompting start-ups to establish clearer and more sustainable paths to growth, as investors’ evaluation metrics begin to emphasize good profitability over growth at all costs,” Singh added.

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