What does it mean to be a successful startup?
As a founder beginning one’s startup, somewhere, at the back of one’s mind, there’s an ambition to become a unicorn. Sure, traditionally, a unicorn has been seen as a mythical creature that has a horn on its forehead. In the 2010s, the business world took over the term to mean a privately-owned unlisted startup that’s valued at over a billion dollars.
In India, there are said to be close to 120 unicorns. But, maybe, India’s startup ecosystem has been operating under the shadow of the success metrics of Silicon Valley. It could be that in India, rapid scaling for valuation isn’t feasible or sustainable for all sectors. Is it time to change the ambitions of a startup in India? Should being a unicorn be the ultimate goal? Has a unicorn obsession in India skewed the perception of what startup success should look like?
Some startups could become unicorns with inflated valuations. But, what about profitability? Sustainability? Tangible growth? Could these be seen as noble pursuits?
Post the 2021 funding boom during the COVID-19 pandemic, investors seemed to have switched their focus to profitability and unit economics, which led to a funding winter, which impacted startups, many of whom were struggling due to mounting losses and serious cash burn. According to a 2023 report, based on the number of unicorns that were there in India at the time, close to 75% of them were incurring operating losses. Cumulatively, the losses were said to be close to $6 billion in FY22, compared to about $3 billion in FY21.
So, maybe it’s time to evolve the unicorn metric. At least, that’s what the folks from Titan Capital think.
Titan Capital is a seed-stage VC firm founded by Kunal Bahl and Rohit Bansal and they’ve come up with a new metric: “Indicorn”. On the surface, it sounds like it just means an Indian unicorn, but actually, an Indicorn is a company founded in the last 15 years, is profitable and has a minimum revenue of ₹100 crores at the end of FY23. It’s said that close to 190 such companies exist in India, as of FY23 & these companies are said to collectively generate roughly ₹110,000 crores in revenue and about ₹8600 crores in profits.
So, what’s the tangible shift in metrics? A unicorn may symbolize that a company could attract a lot of investment and achieve sky-high valuations, but, an Indicorn may signify that a startup could profitably grow and maybe even without VC backing. This may be a shift from speculative investor exuberance to actual business performance.
According to Kunal of Titan Capital, labels give those who are new to business a certain aspiration, so there ought to be a new term that reflects the realities of India’s startup ecosystem. He remarked that hitting the Indicorn mark would indicate that a lasting and enduring company has been built. According to him, such a company wouldn’t be fragile and wouldn’t be based on the whims and fancies of third parties or investors. Kunal stated that if he could, he would change the name of his VC to “Slow Capital”, because, according to him, the desire for extraordinary speed tends to cause companies to fall flat on their faces often.
Some Indicorns in India on the Titan Capital list include PhysicsWallah, Groww, Nykaa, Boult Audio, Urban Ladder, Kinara Capital, Rentomojo, Ketto and Milkbasket, among others.
India’s boasting that it’s become the third-largest startup ecosystem globally. Maybe, now, with the rise of the Indicorns tag, there would be a focus by startups on building lasting value & that’s something that could mitigate the risks of valuation-driven growth models. Maybe, it’s not about how much money you raise, but, how much value you create.
So, Indicorns could demonstrate that they could meaningfully contribute to the Indian economy by innovating and creating jobs & being resilient means that these Indicorns could be better equipped to withstand the boom-and-bust cycles of VC funding. Could the Indicorns tag mean a new wave of mission-driven startups focused on solving local problems in India? Maybe, startup founders would value more thoughtful growth and financial discipline. Nevertheless, Indicorns still have to navigate crazy market conditions, increased competition and evolving consumer expectations.
Plus, it seems like VCs have already begun placing greater emphasis on business fundamentals, so it all works out. There have been concerns about valuation bubbles and being over-reliant on external funding. So, will an Indicorn attract a different breed of investor? One that’s looking for steady and long-term returns, not speculative bets? Or have VCs been typically looking for outsized returns? Because a lot of Indicorns on the Titan Capital list have received funding.
But, is it all hunky-dory just because there’s a new tag? While balancing profitability with revenue growth could sound ideal on paper, there could be some fundamental tension trying to balance them. At some point, to maintain profit margins, would founders have to slow down growth or reduce their market expansion plans? On the other hand, would conservatively growing prevent startups from leveraging their competitive advantages or achieving economies of scale? So, would founders end up with the pressure to grow at all costs? And if they do, would they end up adopting the very risk strategies Titan Capital wants them to avoid? Plus, if there are severe economic fluctuations or supply chain disruptions, would a startup be affected equally whether Indicorn or unicorn? Could a focus on profitability hamstring a startup’s ability to react quickly to how the market changes? Would a growth-oriented startup better pivot or invest in new business lines or better weather prolonged downturns? Plus, maybe, all sectors can’t afford to be capital-efficient and optimize their revenue streams without relying on external funding?
The real test of efficacy of the Indicorn tag may be when a DeepTech startup or an AI startup joins the Indicorn club.
If an Indicorn is in the same space as a unicorn, could the unicorn undercut prices or offer more aggressive marketing to put the Indicorn at a disadvantage? So, could capital efficiency be a straitjacket?
Nonetheless, the Indicorn tag could be seen as a necessary correction in a startup that’s lionized insane growth. Maybe, this is a way to offer a counter-narrative to the mythos of being a unicorn. So, here may be a realistic and grounded benchmark for startups, but maybe not the sole standard of success.
So, has the allure of unicorn status faded? Will being an Indicorn be your new badge of honour? Will this be your new validation?
