As the startup sector confronts a financial winter in 2022, the number of new unicorns is cut in half

In 2022, just 244 new unicorns have been formed globally, compared to 542 last year, with only 23 new unicorns minted in India this year, compared to 44 in 2021.

There is extremely little information available about unicorns. As a result, it’s hard to establish whether these mythological animals enjoy or despise winter. Winters, on the other hand, are despised by their namesakes, or VC-funded firms worth more than a billion dollars.

These so-called unicorns vanished this year amid a cold investment wave in global financial markets caused by stubbornly rising inflation, which pushed central banks worldwide to boost interest rates.

The cold wave has lasted more than nine months and is predicted to increase in 2023, suggesting that even fewer unicorns will emerge next year, after the number has already been slashed in half this year.

According to statistics gathered by private market intelligence platform Tracxn Technologies, just 244 new unicorns have been founded globally so far in 2022, compared to a total of 542 last year. Only 23 new unicorns were created in India this year, compared to 44 in 2021.

To be sure, the first three months of 2022 were not all that horrible for the startup sector. Almost every week, India received a new unicorn, like it did last year. Up until March, India has generated up to 14 new unicorns.

However, the country’s startup ecosystem first felt the financial winter chills in the first month of India’s new fiscal year—FY23 (2022-23). For the first time in over 19 months, or since August 2020, no new unicorns were coined in India. Since then, just nine new unicorns have been minted in the nine months to December, compared to 39 in the same time in 2021.

PhysicsWallah and LEAD were two of the country’s 23 new unicorns, while three were fintech startups. Fintech and edtech were two of the most popular industries in 2021. Up to eight new unicorns in the financial sector were founded in 2021, while three edtech businesses became unicorns. India currently has 17 fintech unicorns and seven

In 2022, the hottest sector was SaaS (software-as-a-service). This year, six new SaaS businesses from diverse industries became unicorns, compared to four in 2021 and one in 2020. There are now 16 SaaS unicorns in India.

Apart from SaaS, logistics firms have attracted investment attention. Three more logistics businesses became unicorns this year: XpressBees, Elastic Run, and ShipRocket, increasing the total number of logistics unicorns in India to seven. In 2021, there was just one new logistics unicorn created, and none in 2020.

Despite increasing investor interest in the agritech industry throughout the year, India has failed to develop an agritech unicorn. DeHaat, a Sequoia Capital-backed artificial intelligence agritech business that delivers end-to-end agricultural solutions, was in discussions to seek a fresh fundraising round at a unicorn value, but could only raise money at a valuation of around $700 million.

Funding is slowing.

The drop in the number of new unicorns this year demonstrated how financing to the startup ecosystem has slowed. VC and PE (private equity) financing to India’s startup ecosystem decreased over 50% year on year to $29.2 billion from April to December 2022. PE/VC investors spent around $58.9 billion in the country’s startup ecosystem between April and December 2021, making it the largest in the world.