Harnessing the power of technology, Indian start-ups are providing solutions that can be scaled up and replicated.
An indication of an economy’s strength and innovativeness is its start-up ecosystem. In the past few years, especially the past two years during which the Covid pandemic ravaged whole nations, governments, central banks and the private sector have all come to realise the critical role that start-ups play in providing niche solutions.
In India, the government early on realised the importance of start-ups’ penetrative powers and was quick to provide an encouraging policy and legal framework. India’s central bank, the Reserve Bank of India, fully appreciated the importance of technology in Indian society, governance and economy, and provided a reinforcing financial framework. Indian entrepreneurs took the lead and went full steam with their ideas. The result of such concerted effort is in the phenomenal number of unicorns that India generated in 2021. More importantly, given India’s multicultural and varied demography, the successful models can be replicated in other countries as well.
A Part of the Solution
India is now home to 100 unicorns with a total valuation of USD 332.7 billion. Most of these unicorns are tech-native companies and have proved their mettle by providing solutions to some burning issues that include education, financial services, mobility, logistics, e-commerce (B2B and B2C), SaaS, healthcare, and more. These growth sectors are representative of not just Indian but also global citizens’ aspirations.
The tech-based Indian unicorns have the potential to transform from billion-dollar to multi-trillion-dollar businesses as their functions are global in nature. Till now, India has proved its strength in software and ITeS and made the world its market. Another area where India is uniquely positioned and can become a significant contributor like in software, is edtech. Some Indian companies such as Byju’s, which is among India’s largest unicorns (estimated valuation of $18 billion), are trying to create global scale. In payments, India has shown irrefutable performance. Banking transactions, for example, are almost fully digital. The Indian central bank’s latest annual report shows that the total volume of digital payments in non-cash payments increased to 98.5 per cent during 2020-21. In terms of value, digital payments formed 96.2 per cent of non-cash payments in the same period.
This steady increase is due to the plethora of digital payment options available to everybody, be it a street vendor or a large conglomerate. The digital revolution had started a few years back but was pushed to the forefront during the Covid pandemic lockdowns. The payments revolution would have, however, been short lived without the already up and running telecommunication services.
As a consequence of such strong inter-linked loops, most of India’s unicorns are digital native companies that have successfully caught the baton and run in various directions, be it fintech, edtech, health-tech or logistics-tech.
Border-less Innovation, Scale and Replicability
A confluence of many factors has created an environment that is conducive to nurturing innovation. India makes for a rich testing ground given its large and complex market as well as the number of solutions required. Disruptive technologies in tandem with people’s confidence in using technology has increased the success of use cases and prepared the ground for the next level of innovation by enterprises.
Covid acted as a catalyst—what started as a ‘maybe’ became a necessity. The benefits of digital adoption are getting greater appreciation globally, and the replicability of many of the business models points towards the next level of global partnerships. In addition to that, the ability to scale up has caught the eye of global investors.
The other silent force behind the success of unicorns is the talent of innovators and entrepreneurs. They have the required experience in use of digital technology and understand international best practices. They are at the forefront of graduating new-age technologies such as Artificial Intelligence (AI), Machine Learning (ML), blockchain and others from the confines of testing to multiple use cases. All institutions of higher education compete fiercely to have the best incubators, accelerators and mentors. Even at the school level, there are more than 8,700 ‘Atal Tinkering Laboratories’ where more than 7 million children actively engage in inculcating skills such as design mindset, computational thinking, adaptive learning, physical computing and more. That is where the next crop of Indian unicorns will come from.
As a consequence of the success of the early Indian unicorns, as happens often, funding sources have sensed the potential and also that of those waiting in the wings. The funding landscape has changed. Some geographies are proving to be a deterrent to investment, and the focus has shifted to India. Fintech leads with investments worth $4.6 billion recorded till September, up about 296 per cent from $1.6 billion for the same period in 2020, according to a study by PwC. Investments worth $2.4 billion were recorded for 53 closed deals this year in Q3 CY21 across several stages of investment.
Smart use of technology has a huge impact on all types of markets. All enterprises, be it start-ups or conglomerates, need it to gain an edge in domestic as well as international markets. Indian unicorns are a lively representation of this fact. A spiral effect is unfolding in India–as more unicorns get created, more are spawned.