Photo by Per Lööv on Unsplash
Introduction
Once known entities in the US, companies like Amazon, Apple, Microsoft, and Facebook have grown into industry titans. The United States of America is known for innovation and freedom. It is thought of as a location where people might experience extraordinary success in a variety of fields including business. However, these businesses gain success quickly because of the strategic efforts of their founders, the provision of high-quality products, the guarantee of customer pleasure and successful marketing techniques.
The US provides an ideal environment for startup companies to flourish. One notable category within this is known as "Unicorns," referring to privately held startups with a valuation exceeding $1 billion. The term was coined by Aileen Lee, the founder of Cowboy Ventures. Statistics from the official Twitter account "World of Statistics" indicate that 56% of unicorn founders in the US were born within the nation, while the remaining 44% were born outside of the US. This highlights the diverse and inclusive nature of entrepreneurship in America that leads to welcoming talent from both domestic and international origins.
Rise of Indian Startup Founders: From US Dominance to Indian Market
In recent years, a significant number of unicorn startups in the US have been founded even by Indian entrepreneurs this showcase their knowledge in the tech industry. Key examples include Instamart, founded by Apoorva Mehta, AppDynamics by Jyoti Bansal, Nutanix by Dheeraj Pandey, Ajeet Singh, and Mohit Aron, and Zscaler by Jay Chaudhry.
Shift in Unicorn Startup Landscape
Initially, India's dominance in the US startup scene was notable with more unicorn startups founded by Indians in the US than in India itself. This trend persisted until 2018 when the US had 11 unicorn startups with Indian founders compared to India's count of only 9.
Indian Startup Boom
However, the scenario has swiftly evolved with India experiencing a surge in its unicorn count. Presently, India represents a staggering 90 unicorn startups which surpass the number of Indian-founded unicorns in the US. This surge underlines the growth of India's startup ecosystem marked by record fundraising in 2021 and the emergence of numerous unicorns.
Cultural Factors and Educational Background
The success of Indian founders abroad may be attributed to the emphasis on education deep-rooted in Indian family values. Despite criticisms of the Indian education system, many of these entrepreneurs completed their Bachelor's degrees in India before venturing to the US and establishing globally competitive companies.
Opportunities on Indian land
With India's startup ecosystem rapidly evolving, strengthened by improved infrastructure and increased investment, there are expanding opportunities for Indian entrepreneurs to build thriving enterprises domestically. Another question comes is, whether future generations of Indian founders opt to nurture startups within India ? or will the nation witness a spread of successful ventures in the foreseeable future ?
A Look at the Global Unicorn Landscape in 2024
This report dives into the world of unicorns, which are privately held startups valued at over $1 billion. Here's a breakdown of the key findings:
Indian Founders Lead in Offshore Unicorns
Interestingly, Indian entrepreneurs are creating more successful startups outside of India than within. The report reveals that Indian founders have co-founded an amazing 109 unicorns abroad compared to just 67 in India itself. This trend highlights a potential gap in the Indian startup ecosystem that may not be fully nurturing these high-growth businesses.
Global Unicorn Distribution
The United States remains the leader in the number of unicorns, it represents a massive 703 followed by China with 340. This indicates the dominance of these two countries in the development of billion-dollar startups. The overall number of unicorns globally had reached a new high of 1,453 spread across 53 countries and 291 cities. This signifies a growing and diverse pool of innovation worldwide.
Investment Trends and Challenges
The report acknowledges a slowdown in new unicorn investments compared to the peak in 2021. Investors are finding it harder to exit their investments through public offerings (IPOs) which might reduce enthusiasm for new ventures. Despite strong stock market performances in the US, India and the UK, there haven't been many significant unicorn IPOs. This suggests a potential disconnect between overall market valuations and the ability of startups to go public.
The Importance of Unicorns
The report emphasizes the crucial role unicorns play in driving economic growth and innovation. These high-growth startups create jobs, attract investments and contribute significantly to the "new economy." While some unicorns might fail as demonstrated by the recent struggles of the Indian education platform BYJU's.
Flipping side to another story
According to the Hurun Report, which delves into unicorn trends, these billion-dollar startups emerged approximately nine years ago, around 2014, on average. The average age of unicorn founders is 43, suggesting that they established their ventures around the age of 34. On average, unicorns have two founders with a notable portion being serial entrepreneurs. Many founders (40%) first connected professionally, while others (about 1 in 8) forged their partnerships during their university years. The most common educational backgrounds among these founders are in Computer Science and Business Studies.
Interestingly, one out of every five unicorn startups had at least one co-founder from a different country. The United States, particularly Silicon Valley serves as a magnet for foreign unicorn founders followed closely by Europe. India stands out as the top contributor of emigrant unicorn founders followed by China, Israel, and Russia as highlighted in the report. This pattern highlights the global nature of entrepreneurship and the cross-border collaborations driving innovation and success in the startup landscape.
The report highlights that founders from these countries are responsible for creating more unicorns outside their respective nations than within. Specifically, Indian founders have co-founded 70 unicorns outside India compared to 68 within the country. Similarly, Chinese founders have co-founded 32 unicorns outside China contrasting with 316 within China.
Moreover, India has become a major unicorn hub with more than a hundred unicorn-valued firms totalling USD 250 billion. In recent years, these firms have successfully raised nearly USD 63 billion in capital. It is interesting to note that a significant percentage of Silicon Valley firms are run by people of Indian heritage. This demonstrates the significance and worldwide reach of Indian entrepreneurship. Even while Indian businesses are becoming more and more successful, many have decided to locate their headquarters overseas. This practice, known in the business world as "flipping," is moving a company's headquarters abroad, frequently to a country with advantageous tax and regulatory policies. This tendency was brought to light by the Economic Survey 2022–2023, which showed that Indian businesses were strategically attempting to take advantage of favourable economic environments abroad.
India's Parliamentary Panel's Response to Flipping Issue
India's Parliamentary Panel recently addressed the issue of flipping, particularly in the context of startups. In its report on the Demand for Grants of the Department of Promotion of Industry and Internal Trade released in March 2023, the panel emphasized the need to accelerate the process of Reverse Flipping. This entails creating a favourable business environment and establishing new industrial parks specifically tailored for modern startups.
Factors Driving Flipping and Preferred Destinations
According to the Economic Survey, "flipping" is a typical occurrence in the early phases of companies and is impacted by several factors including investors' and founders' personal preferences, tax laws, and commercial considerations. Other motivations for flipping include the ability to access more advantageous financing markets and improved intellectual property (IP) protection and enforcement, and advantageous tax laws about IP licensing income.
Singapore, UAE, and Netherlands emerge as the top preferred destinations for startups seeking to relocate. The Parliamentary Committee observed that these countries have custom-tailored their policies, tax structures, and other incentives to encourage companies to establish holding companies and store IPs within their jurisdictions, thus positioning themselves as attractive locations for startups to set up regional headquarters.
Conclusion
Significant changes were brought about by the pandemic in several industries, most notably Fintech, e-commerce, and healthcare. The trend toward remote employment, online education, and online purchasing has resulted in a noticeable increase in demand for businesses that provide digital services. Online education platforms, e-commerce services, and tools that made remote employment possible were the driving forces behind this growth. In addition, there was a significant shift in consumer behaviour with a greater focus on sustainability, wellness, and health. As a result, businesses in these niches—such as telemedicine services, wellness apps, and producers of environmentally friendly products—found themselves in front of encouraging development prospects. It's interesting to note that the epidemic made it easier for startups to establish and run remotely to which cut down on overhead expenses and administrative roadblocks. Furthermore, the fintech industry experienced a notable increase in demand, driven by the extensive implementation of digital payment solutions amidst worldwide lockdowns.
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