The startup scene has been substantially subdued in 2022. Compared to 542 in 2021, only 244 new unicorns were created in 2021. Indian startups have not been aloof from the global trend, and compared to 44 in 2021, the country produced only 23 new unicorns in 2022, nearly 50% down. India attracted USD 25 billion of funding in late-stage startups in 2022, compared to USD 43 billion in 2021. The most dominant theme in the Indian startup scenario this year has been the massive lay-off in tech companies. As per available data over 18,000 technology professionals lost jobs in 52 startups including unicorns and semi-unicorns. Globally, 1,400 tech companies laid off over two lakh employees in 2022. The trend is likely to continue in 2023, experts believe. The first half of 2021 was the brightest period for startups globally. It came on the back of early Covid-19 lockdowns when tech companies saw massive growth in their businesses. Companies went on a hiring spree expecting the trend to continue but, the economic slowdown caused by the Covid-19 closures of factories and a large number of people losing their jobs began to show on the cash registers of the companies in the second half of the year.
By the end of 2021, the economic slowdown effects were more widespread and tech stocks had started taking hits on exchanges worldwide. In February, the Russia-Ukraine war further dampened the global investment environment as venture funds didn’t want to take risks in rapidly-changing geopolitics. Tech companies with unbelievable market caps and valuations began to face a liquidity and funding crisis, which hit the outlook for the entire tech sector. Apart from layoffs, the Indian startup scene has been vibrant, but far from robust. India is the third largest startup ecosystem with over 85,000 startups and 107 unicorns. The government has committed Rs 10,000 crore “Fund of Funds” to grow the domestic VC industry. It also claims to have offered over 220 tax exemptions. Department for Promotion of Industries and Internal Trade (DPIIT), which takes a lead role in India’s startup campaign, has been regularly launching new initiatives to help Indian startups. One such initiative taken recently, India-US Startup SETU, aims to benefit Indian startups from US investors and mentors.
As per a study by Inc42, among the next 100 unicorns, Bengaluru is likely to account for 43%, Mumbai 22%, Delhi-NCR 16%, Others 10%, and Ahmedabad, Chennai, and Hyderabad each 3%. India is celebrating Startup India Innovation Week from January 10 to January 16. Some of the most celebrated startup icons and venture funds are likely to converge on Noida, in Delhi-NCR. Tesla and SpaceX CEO Elon Musk is also expected to be present on occasion. While India’s huge talent pool and an equally large number of everyday problems create an environment suitable for startups, venture funding is the only problem they face. With funding becoming scarce, the startup scene is not as cheerful as in early 2021. As layoffs are rampant, the morale of the spirited startup workers and founders is conspicuous by their absence. The tough economic situation is unlikely to change in the near term. And, in this environment venture funds are likely to take risks and invest substantially in startups.