While the number of new unicorns dwindled in 2022, a majority of start-ups that are either unicorns or soonicorns, were profitable or were on the path to profitability. According to Redseer’s report on India’s Internet economy, 80 per cent of India’s unicorns and soonicorns are on the path to profitability. This comes at a time when India added only 22 unicorns due to the funding winter, down 51 per cent from the 46 unicorns it added the previous year. Experts suggest that the push for profitability for start-ups comes as a result of investors becoming more cautious after the pandemic, demanding results for their investments.

2022 was not a good year for the Indian start-up world, as it grappled with liquidity crunches related to global macroeconomic developments such as rising interest rates. And while Indian start-ups are seeing a cash squeeze after a blockbuster 2021 when start-ups and unicorns raised a massive $32 billion across 1,406 deals, prudent patronage from the investor community has likely pushed start-ups to focus more on profitability. While in the previous years investors had the funds and the risk appetite to provide funding at a much lower threshold, sentiments to raise funding are shifting now. 

While the impact of these trends is only being seen now, the shift in sentiments for the investor community began right after the pandemic. Sanchit Vir Gogia, Chief Analyst, Founder & CEO of Greyhound Research, said: “This is not a new finding; these things don’t happen overnight, these trends started many years ago. Post-pandemic, there has been an intense amount of pressure from the investor community on start-ups. Funding is now hard to come by and start-ups need to show more. This has increased the pace of profitably.”

According to the latest data, India has over 107 unicorns, making it the third-largest start-up ecosystem in the world. Analysts argue that this ecosystem should brace for a prolonged funding winter, as macroeconomic conditions worsen. Start-ups need to and have adapted to the funding winter, conserving more cash to give themselves longer runways.