B2B unicorns need 50% less funds than B2C
India's unicorn club has increased from just about nine companies at the start of 2018 to close to 30 now, collectively valued at about $100 billion, according to an Iron Pillar report.
The venture capital firm's report also found that India's unicorn club has increased from just about nine companies at the start of 2018 to close to 30 now, collectively valued at about $100 billion. It added that technology-based business-to-consumer (B2C) startups like Flipkart and Swiggy in India raised $206 million on an average to reach unicorn status compared with business-to-business (B2B) companies serving global markets. This would relate to Freshworks and Icertis, which have raised $97 million.
B2B startups serving the India market, like payments company BillDesk and commerce venture Udaan, raised $131 million on an average before they became unicorns, according to the report.
The development comes at a time when B2B startups are attracting an increasing amount of capital at higher valuations, given better unit economics and clearer paths to profitability in India. Last week, Freshworks saw its valuation more than double when it raised $150 million at a $3.5-billion valuation. Even in markets like the US, public offerings of high cash burn consumer-facing startups like Uber have slipped into the red, while software companies like Zoom, PagerDuty and Datadog have done well.
India added 11 unicorns in 2018, and has already got 10 more in 2019, according to the report, which excludes ShopClues. The Gurgaon-based e-tailer has been sold to Singapore's Qoo10 for less than $80 million in stock after being valued at over $1.1 billion in 2016.
"What we saw in China from 2006 onwards is what we have been seeing in India from the last two years. It's a combination of good ideas from good entrepreneurs, market coming to size and right kind of capital availability from early to mid-stage," said Anand Prasanna, managing partner at Iron Pillar who has tracked the China market closely.
He said that while India will take years to catch up with China in GDP per capita, there are enough opportunities in B2C startups as "almost every infrastructure in India is going to be built in India on the back of technology".
Out of the total 30 unicorns, about 17 are in the B2C, while 13 in the B2B space. Japan's SoftBank is the most active investor in unicorns in India with 11, followed by Chinese internet conglomerates Tencent (7) and Alibaba (5).