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With the ecosystem maturing in the last decade, the time taken by start-ups to reach the $100-million revenue mark has come down from 18 years in 2000 to five years in 2017, according to a report.
There are about 100 unicorns and 170 soonicorns in the country. Of these 270 shining stars, more than 40 start-ups in FinTech, eCommerce, and logistics have crossed the $100-million revenue threshold as of FY22. These start-ups have taken anywhere from 5 to 12 years to reach this scale.
According to a Redseer Strategy Consultants study, venture capital has played a critical role in assisting start-ups to reach the revenue milestone. Moreover, investors add tremendous value to the companies they fund. In addition, the knowledge of governance, financial prudence, and networks brought by VCs is invaluable for start-ups.
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Despite funding winter, majority of Indian unicorns turn profitable
The push for profitability comes as a result of investors becoming more cautious after the pandemicIn the last 15 years (CY 2008 to CY2022), VCs have invested about $143 billion in the start-up ecosystem, which is currently valued at $804 billion. At current valuation, it translates to an approximately 4.5x return for VCs on their investments, as noted in the study.
Challenges in scaling
There are approximately 12,000 start-ups in India, with revenue ranging from emerging ($10 million), growth stage ($10–100 million), to large ($100 million to >$1 billion). Of these, 95 per cent belong to the emerging category, 3–4 per cent are in the growth stage, and less than 0.5 per cent are in the large stage.
Most start-ups face scaling challenges in their growth journey. Many belong to niche industries that restrict their total addressable market, while others need help with product-market fit and unsustainable growth. In fact, factors such as inadequate profitability and operational, organisational, and governance limitations are the main problems that cause start-ups to fail.
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