19 startups lose Unicorn status owing to funding squeeze

19 startups lose Unicorn status owing to funding squeeze

Subject :Economy

Section: National Income

Context: : ASK Private Wealth releases Hurun India Future Unicorn Index 2022

Key Points:

• The index lists the present unicorns as well as companies that are on path to become unicorns.
• 19 startups fell out of the unicorn list. Unicorn is the term used for startups valued over $1 billion.
• The number of unicorns stand at 84 right now as against 51 in the year-ago period
• There are 122 others valued at over USD 200 million which can achieve the unicorn status in the next 2-4 years
• The falling out of startups from unicorn club is attributed to several factors, prime being a ‘funding winter’, which is result of:
  • liquidity conditions are getting tighter all across the world.
  • recessionary conditions in Europe, also reduce investment sentiment
  • Elevated interest rate, a cycle of hikes to counter inflation that started last year is still on.
  • Rising interest rates and global uncertainties have dramatically reduced the appetite of investors to put money into startups.
  • geopolitical headwinds have combined to make it harder for startups to raise capital
• Late-stage funding and mega deals in the Indian startup ecosystem have been hit hard by the funding winter.
• Despite the ongoing ‘funding winter’ which can impact start-up valuations, the number of unicorns or startups valued at over USD 1 billion will grow by 122 to cross the 200 companies mark in the next four years
• The index uses terms:
  • Gazelle: startup worth atleast $200 billion and likely to become a unicorn in next 2 years.
  • Cheetah: startup worth at least $200 billion and likely to become a unicorn in next 4 years.