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Tech Start-ups in 2022: We are not alone in slow market
Tech Start-ups in 2022: We are not alone in slow market

March 23, 2023

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Tech Start-ups in 2022: We are not alone in slow market

"We are not alone." That is the crux of the slowdown in the Indian tech start-up ecosystem. Though India's tech start-up ecosystem is quite resilient and innovative, the global meltdown last year was so severe that its effects were felt here as well. The slowdown in the start-up ecosystem is a global phenomenon, and the downturn in the valuation multiples of listed technology companies is a clear indication of that.

The graph you can see below is the index chart of valuation multiples of NASDAQ-listed technology companies (a set) vs. the number of unicorns in India.

 

 

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So, as you can see in the graph, the median revenue multiple (the thin blue line) was in the range of 10X to 16X in the span of Q4 2020 to Q2 2022, when most of the unicorns came to India and also globally, but if you see Q320 22 this revenue multiple dropped to 6X, and that’s why the valuation has taken a hit and we have a lower number of unicorns in India as well as globally.

 

Globally, 2021 was an anomaly for new unicorn additions. The value multiples have altered due to market changes, necessitating significantly improved business indicators for start-ups. After rectification, the rate of unicorn formation is consistent with the basic principles of the ecosystem.

Interestingly, in 2022, the potential unicorn club expanded at similar pace as 2021. Potential unicorns are the start-ups that have raised more than $50 billion in total funding to date. Through 2021–2022, the valuations for seed and early stages remained stable. Increase in potential unicorn pool is symptomatic of ecosystem depth and sustained investor interest in technology start-ups. In terms of industries, business strategies, clients, and regions served, Pool is more diversified.

 

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This potential unicorn club now has 170+ members, and we added 60 this year. When valuation of start-ups is questioned, this pool showcases the scaling potential of Indian start-ups even in dynamic market sentiments. So, booming potential unicorn club also highlight that new unicorn era is not quite far away its just a matter of time.

 


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