Bangalore is the “Silicon Valley of India” and the #1 IT offshore hub. I lived in this dynamic metropolis for a few years, and since then I have regularly followed the dynamics of the tech and start-up scene in India. The momentum has increased rapidly in the past few years: While from 2011 to 2018 about one Unicorn was launched every year, the output rate is now dozens per year. Economy Newspaper Handelsblatt resumed end of 2021: “With a total number of around 70 unicorns, India is only behind the USA and China, which each have several hundred billion start-ups. By comparison, the market researcher CB Insights comes up with only 19 German unicorns.“
Unicorns in India: an overview
Among the best-known Unicorns on the Indian subcontinent are: eCommerce retailer Flipkart, which was acquired by Walmart in 2018. The company currently generates retail sales of around EUR 0.9 billion (Amazon leads the way with around 1.9 billion). Another player in eCommerce is Snapdeal, founded in 2010 and now backed by SoftBank. However, Snapdeal is far behind with approx. 60 million euros in sales after the two rivals made massive investments.
Among the (widely known) success stories in India is Zomato, in the food delivery service and restaurant ratings segment. The company went public in mid-2021 and has a market valuation of just over €9 billion. In the same segment is Swiggy (also with Softbank as an anchor investor): the valuation is around 5.5 billion US dollars after a recent funding round.
Also worth mentioning is FinTech Paytm, which recently made headlines with an unfortunate stock market debut. The payment service was founded in 2000; Berkshire Hathaway, among others, invested here. As recently as mid-2021, the company was valued at around 16 billion US dollars; the IPO at the end of 2021 failed to meet the lofty expectations, and the market capitalisation today is just over 8 billion US dollars.
Finally, a few names from the club of unicorns: Licious, an e-commerce company specialising in meat and seafood (turnover: close to 200 million euros). Ola Cabs is the Indian equivalent of Uber (which is also already present on the Indian subcontinent). LEAD School is a tutoring platform that offers, among other things, programming courses for children.
India’s Start-Up ecosystem
First of all, the “start-up heat map” in India identifies several centres of innovation. It is not without reason that Bangalore is nicknamed the “Silicon Valley of India”, because around a quarter of Indian start-ups are founded there. No wonder, because numerous industries were attracted to this science metropolis early on, above all the IT industry. The number of IT professionals is in the order of 500,000 – this is the approximate estimate. Bangalore is a Tier 1 city, which also includes Mumbai and Delhi (including Noida). Two-thirds of the start-ups alone are located in these Tier1 cities. Cities like Hyderabad (nicknamed Cyberabad), Chennai and Kolkata also stand out on the “heat map of start-ups”.
Success factors of Indian start-ups can be described roughly as follows. First, just like the US, India has a large home market. While it would be naïve to believe that this is a uniform market (regulations, languages, taxes), the urban middle class addressed by e-commerce providers like Flipkart is fairly homogeneous across all regions. India ranks 7th in terms of (nominal) GDP; if you look at GDP based on purchasing power parity, India even moves up to 3rd place (after USA, China).
Secondly, it is also absolutely worth mentioning that there is a high affinity for digital technology in India; the willingness to try out new apps, new digital offerings is extremely high. Incidentally, India is the country with the second highest number of mobile devices in the world. Third, India’s start-ups have access to a large pool of labour in centres like Bangalore, Mumbai, Delhi, Hyderabad, etcetera.
Fourth, the number of incubators and investors is steadily increasing – albeit from a very low level. However, as was evident from the previous list of some unicorns, a lot of investment capital from the US is now flowing into Indian start-ups. The government and industry have also now created functioning structures to promote the start-up ecosystem. Finally, while India may now be showing autocratic tendencies with the advent of Prime Minister Narendra Modi, the country offers itself as an attractive alternative for emerging market engagement for many investors in the face of increasingly unpredictable regulation in neighbouring China.
