India is becoming a digital-first economy. The country with a population of 1.3 billion people has a smartphone penetration of 45% and is one of the cheapest countries for mobile internet worldwide. Digital adoption has received a significant boost from the Covid-19 pandemic.

Technology startups were the biggest beneficiaries of this trend. According to the IT industry body Nasscom, India has the third-largest technology startup ecosystem in the world, behind the US and China. Nasscom highlights that the country has 12,500 tech startups, of which 35 are unicorns (privately-held startups valued at over $1bn).

Ecommerce and digital payments are the top themes amongst Indian unicorns

Ecommerce is the most important theme among Indian unicorns according to GlobalData. India’s ecommerce market was worth INR4.3tn ($60.5bn) in 2020, having grown at a compound annual growth rate (CAGR) of 26.3% since 2016. The pandemic has acted as a further catalyst for ecommerce, forcing a widespread shift to online shopping as consumers were placed under lockdown for several months in 2020. Food delivery unicorns Swiggy and Zomato saw a surge in orders in 2020, with both adding safety measures to their operations such as contactless delivery and rider safety checks. BigBasket, the leading online grocery and another unicorn, saw a three-fold increase in the number of orders as customers were forced to buy essentials online.

Digital payment tools also benefited from increased online shopping. This was supported by the Unified Payments Interface (UPI), a real-time payment system developed by the Indian government. The biggest Indian unicorn Paytm, valued at $16 bn, was the key beneficiary. In addition, we saw digital payments startups like Pine Labs and Razorpay join the unicorn club in 2020.

Other key themes driving Indian unicorns are edtech and the sharing economy. The biggest players by valuation in these themes are Byju’s and Oyo Rooms, respectively.

India is thinking big and global

With sizeable investments, the Indian unicorns have been thinking globally. Paytm, for example, has established footprints in Canada and Japan. Byju’s, the most valuable edtech startup in the world, has gained the economic muscle to acquire other startups and expand in overseas markets.

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Unicorns are also disrupting domestic markets. Food delivery apps Zomato and Swiggy dominate the market, with the former acquiring Uber Eats’s Indian business in 2020. Other ecommerce startups like Lenskart (online eyewear) and Nykaa (online beauty) also enjoy dominant positions in their respective ecommerce segments. Entrepreneurs are chasing adjacent opportunities to unlock value. For example, Ola’s electric vehicle unit, Ola Electric, is also a unicorn. We also expect that some of these unicorns will go public this year. Nykaa, Zomato, PolicyBazaar, and Delhivery have all announced plans for listings in 2021.

2021 will see more Indian startups join the unicorn club

The Indian startup ecosystem has demonstrated its resilience during the pandemic. In 2020, 1,600 new startups were launched in India. The country ranked second in new unicorn additions in 2020, behind the US, as 12 tech startups joined the unicorn club.

The government of India has also announced several schemes to support startups. In January 2021, Prime Minister Narendra Modi announced the launch of the ‘Startup India Seed Fund’, worth INR10bn ($140m) to help startups and support ideas from aspiring entrepreneurs. This investment should keep the startup momentum going, and 2021 will see more Indian startups join the unicorn club. Nasscom predicts that at least nine unicorns will be created in 2021, with the ‘Unicorn club’ growing to contain 50 companies by the end of 2021. The pipeline includes digital payments and fintech startups like Cred, Mobikwik, PayMate, and BharatPe.