Redseer predicts growth of profitable unicorns from 30 to 55 by FY27
- ByStartupStory | July 18, 2023
According to a recent analysis by strategy consultants Redseer, the number of profitable unicorns in India is expected to increase from around 30 in FY22 to approximately 55 by FY27. The study also reveals that nearly 50% of unicorns are projected to achieve profitability by FY27, while about 20% may face challenges due to regulatory issues, declining demand, and ambiguous business models. Some struggling unicorns might pivot to new models, get acquired, or cease operations altogether.
The Indian startup ecosystem has experienced fluctuations over the past few years due to macro disruptions. The analysis highlights a sharp funding peak of approximately $50 billion during FY22, followed by a gradual funding winter that led to a 70% drop in FY23 to $15 billion.
Comparing private unicorns to publicly listed companies valued over $1 billion, Redseer notes that there are around 100 unicorns and fewer than 400 public companies with a market cap exceeding $1 billion. The analysis emphasizes the outsized impact of tech on the economy and the tendency for overvaluation in the startup world.
Speaking at the Ground Zero summit hosted by Redseer Strategy Consultants, Mohit Rana, Partner at Redseer, discussed how Indian startup funding shifted towards profitable growth and what lies ahead. Challenges like increasing cost of capital, interest rates, recession in developed markets, declining tech stock values, and slowing consumer internet growth have prompted startups to expedite their path to profitability and reduce burn rates.
Rana emphasizes the importance of boards in guiding and supporting founders during challenging times. He points out how listed tech companies in India and their global counterparts have made progress towards profitability by launching new products, expanding into new segments, upselling to existing customers, and optimizing costs.
The analysis forecasts that profitable unicorns in India could generate up to 5 times the profit they did in FY22 by FY27. The fintech and financial services, B2B, SaaS, and ecommerce sectors are expected to drive the highest pool of profit in the coming years. While losses may decline for many companies during this period, those with negative margins could experience funding changes, valuation drops, and a shift to a lower growth trajectory.
Redseer highlights the opportunity for companies to increase their share of the digital ads market to drive revenues and reduce customer service costs while maintaining high CSAT scores. Only 10% of companies have optimized their spending while maintaining good customer satisfaction.
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