Start-ups beat Covid-19 pandemic odds to turn into unicorns

Covid-19 has turned the start-up ecosystem upside down. However, few segments have been making hay across the world over the past few months. In fact, over 60 per cent of the unicorns (a unicorn is a start-up that has a valuation of $1 billion or more) that came about this year belong in edtech, enterprise applications, enterprise infrastructure, health-tech and fintech.

Data from Tracxn, a firm that tracks investments and financials of private companies and start-ups. showed that 68 start-ups in the world achieved unicorn status this year. Of these, enterprise infrastructure and fintech start-ups topped the list with 11 unicorns each. This was followed by enterprise applications at eight, and edtech and health-tech at six each. Start-ups founded since 2010 have been considered for this analysis.

Seven of the 68 unicorns are Indian start-ups. FirstCry was the first to enter the league this year in February. But even after the pandemic closed in on the country in March, six other start-ups joined the list. Nykaa became a unicorn in March, followed by Postman and Zerodha in June, Nxtra Data in July, and Unacademy in September. The latest start-up to join the league was Razorpay in October.

Digital drive

“Pandemic enforced digital acceleration and adoption in India. As more companies allowed employees to continue to work from home, tools enabling easier data access, easier team coordination real-time project management became crucial, and hence enterprise software companies become attractive as demand grew,” said Pankaj Raina, Managing Director, Research and Investments, Zephyr Peacock India.

He added that Covid-19 also increased the number of users going online to fulfil needs such as buying insurance, healthcare services (doctor consultations), which in turn increased the number of paying users for the companies and helped them grow, thereby attracting investor attention.

According to a recent report by TiE Delhi NCR and Zinnov, while most segments in the start-up ecosystem have started recovering to pre-Covid levels, sectors such as edtech, online health insurance, online fitness and online teleconsultations have been seeing significant tailwinds. As per the report, edtech start-ups in the country saw a 3.6X growth in total funds raised this year when compared to last year, in January – August, while enterprise tech start-ups saw a 1.4X jump in funding raised in 2020 (January-September) as against in 2019, during the same period. The inclination of retailers to adopt digital technology has also surged to 30-40 per cent during Covid in contrast to the 5-8 per cent before Covid.

Key sectors

“Health, education and finance are amongst the key pillar sectors that drive an economy, thus, innovations in these sectors are being recognised. But the unprecedented digital adoption in all segments of the Indian population and businesses during the pandemic, has led to start-ups building solutions in enterprise-focussed infrastructure and applications also being supported to capitalise on this new wave of digital adoption,” said Anuj Golecha, Co-founder, Venture Catalysts, adding, “The quality of the entrepreneurs is getting better in the new normal world. The testing times have made founders more resilient to adapt fast and pivot their products and business models.”