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A unicorn is a privately held company worth more than a billion US Dollars. These companies are called unicorns as most new companies fail in the first few years and very few make it to the billion-dollar valuation.
In 2019 and 2020, India has seen the birth of 8 and 10 unicorns respectively by the end of those years.
However, in a historic week for the Indian startup ecosystem, six new companies have entered the unicorn club from April 5 to April 9.
While India trails behind economic giants USA and China in the number of unicorns produced per year, large global VCs like Tiger Global, Naspers Ltd., and SoftBank have shown their interest in India's fast-growing business ecosystem.
The six unicorns
Groww, a Bengaluru-based online investment platform founded by IIT Bombay alumnus Lalit Keshre had raised $83 Million in its Series D funding round led by Tiger Global, bringing its valuation close to $1 Billion.
PharmEasy has made its name as the first unicorn in the E-pharmacy sector after a Series E funding round led by Prosus Ventures that raised $350 Million. This makes the Mumbai-based startup currently valued at $1.5 billion.
The messaging services company GupShup, among the first graduates of IIT Bombay's SINE incubator, has raised $100 million in a funding round lead by Tiger Global. The $1.4 billion valued company is operational in India, the US, and the UK and is already profitable.
Meesho Inc. is an E-commerce marketplace for small businesses and individuals founded by IIT Delhi graduates. This startup is now valued at $2.1 Billion from its previous $700 million valuations after a $300 million in the Series E funding round led by Softbank Vision Fund.
ShareChat, owned by Mohalla Tech and having a user base of 280 million users has raised $502 million in their round of funding led by Tiger Global and Menlo Park-based Lightspeed Venture Partners.
Well known for having Rahul Dravid act like a goonda in their advertisement, Kunal Shah's Cred has raised $215 million in their Series D funding round led by Falcon Edge Capital and Coatue Management. This raises the credit card payments company to a valuation of $2 billion.
Is investing in private startups more profitable than investing in publicly listed companies?
As successful venture capitalist, Bill Gurley states, "Venture capital is not even a home-run business. It’s a grand slam business." He also goes on to add that those investing in private startups are subject to the Babe Ruth effect - they strike out a lot but their home runs make up for it. For those unfamiliar with the baseball lingo, like most Indians are, he means that even if most of these investments fail, the ones that succeed often make up for the failures. It's very likely for 10 failed startups for every successful startup invested in, but yet the startup investor will be insanely profitable.
Furthermore, other advantages include
- direct promotion of innovation
- direct promotion of job creation
- timing of investment not being too important
- ability to diversify your portfolio
- valuations relatively unaffected by market sentiments
- an integral part of the team - you get to help and make decisions to direct a startup than you can for a large-cap company you are invested in.
However, investing in startups directly is not as rosy as it seems, and we have a detailed upcoming article on the pros and cons of startup investing.