Flip Side of the Coin: Indian Unicorns' Foreign Destinations

India ranks 3^rd in the Hurun Global Unicorn Index 2023 in terms of number of Unicorns. Indians have founded as many as 138 Unicorns around the world. But out of these, 70 unicorns were started by Indian co-founders with origin outside of India. Nearly 25 per cent of the start-ups in the Silicon Valley are managed by people of Indian origin. India’s startup journey has undoubtedly been remarkable but there is also a Flip side to its unicorn story as well.

India is home to a growing number of startups that have achieved unicorn status, meaning they have a valuation of at least USD 1 billion. However, some of these unicorns have chosen to move their headquarters or expand their operations abroad either through mergers or acquisitions.

One example is Flipkart, which is one of India's most successful e-commerce companies, and was acquired by Walmart in 2018 for USD 16 billion. While the company's operations remain in India, it has set up a development centre in the United States to focus on research and development. Other unicorns to move out of India are InMobi, Hike, Mu Sigma.

The number of startups getting incorporated outside India is also increasing. In fact, some of the companies that turned unicorns in 2022 and 2021 are headquartered overseas. This includes Polygon, Amagi, CommerceIQ, Hasura, Fractal Analytics, BrowerStack, Chargebee, InnovAccer, MindTickle, among a few others.

Today the world is looking at the Unicorns for their disrupting financial services, business management solutions and healthcare. The total value of all known unicorns in the world is USD 4.3 trillion, more than the GDP of Germany.

The Hurun Research Institute has released the Global Unicorn Index 2023, a ranking of the world’s start-ups founded in the 2000s, worth at least a billion dollars and not yet listed on a public exchange.

Where are the World’s Unicorns based?

The Hurun Research Report points out that the world’s unicorns come from 48 countries, up from 42 last year, spread around 271 cities, up from 221.

USA leads with 666 unicorns followed by China with 316. India has retained its third position with as many as 68 unicorns.

The Flipping Indian Unicorns

But there is a flip side to India’s Unicorn story.  India has the highest number of emigrant unicorn founders in the world. The Unicorns usually have 2 or more than 2 founders. One of the co-founders of these unicorns are mostly of foreign origin or many times, these startups are born in India and then they move to other country due to some or the other reason.

According to the Hurun Report, Unicorns were founded nine years ago in 2014 on average. Unicorn founders are 43 years-old on average, meaning that they founded their unicorn when they were 34. Unicorns have 2 founders on average. One third are serial entrepreneurs. 40% met at a previous job, whilst 1 in 8 met at university. Computer Science and Business Studies were the most common degrees pursued by the founders.

“One in five unicorns have at least one co-founder from outside the country of origin of the unicorn. The USA, especially Silicon Valley, attracted the most unicorn founders from abroad, followed by Europe. India led the way for emigrant unicorn founders, followed by China, Israel and Russia,” the Report highlights.

It is surprising to know that India is amongst one of the top three countries producing more off shore unicorns than any other country.

“Founders from India, China and Russia are producing more offshore unicorns than any other country.  India’s co-founded 70 unicorns outside of India compared with 68 in India, whilst Chinese co-founded 32 outside of China, compared with 316 in China,” the report says.

According to another report  India was home for over one hundred unicorns with a total value of USD 250 billion which have managed to raise over USD 63 billion in the last few years. Nearly 25 per cent of the start-ups in the  Silicon Valley are managed by people of Indian origin.

Many Startup companies in India are constantly turning into successful unicorns, but they opt to have their headquarters abroad. 

The Economic Survey 2022-23 pointed the fact that many Indian companies have been getting headquartered overseas, a process termed in the business world as ‘Flipping’, especially in destinations with favourable legal environments and taxation policies.  

Recently the India’s Parliamentary Panel too took a note of this problem. The Parliamentary Panel in its report on Demand for Grants of Department of Promotion of Industry and Internal Trade (DIPP), released in March 2023, called for steps to accelerate the process of Reverse Flipping through conducive business environment and new industrial parks for the new age Startups.

The Economic Survey says that ‘Flipping’ happens at the early stage of the Start-ups, driven by commercial, taxation and personal preferences of founders and investors. 

Other reasons for flipping includes access to more preferential incubators and capital markets, better protection and enforcement of IP and taxation of licensing revenue from IP, agile corporate structures, etc. 

Singapore, UAE and Netherlands are amongst the top preferred destinations for the startups to shift. The Parliamentary Committee observed that these countries tailor-made their policies, tax and other incentive structures to incentivise companies to store IPs and create Holding Companies as Regional Headquarters within their jurisdiction.

The Parliamentary Panel has called for the measure to accelerate the process of reverse flipping by giving a conducive environment to the startups to encourage them to stay in India.

Which are The Top Indian Unicorns based Abroad?

According to the Hurun Global Unicorn Index 2023, India consolidated its Top 3 spot with 68 unicorns, led by online educator BYJU’S worth US$22bn, followed by on-demand delivery start-up Swiggy and fantasy sports platform travel-stay finder Dream11 (US$8bn each).

A further 70 unicorns were started by Indian co-founders outside of India, taking the total to 138 unicorns founded by Indians around the world.

Of the unicorns founded outside of India, significantly all were in the USA (64), led by the Bay Area, and 2 in the UK, and 1 each in Germany, Singapore, Indonesia and Mexico.

More Unicorns Post-Covid?

Since the pandemic, the number of unicorns has surged from 494 pre-Covid to 1361 today, and the total value has risen from USD 1.7 trillion to USD 4.3 trillion.The number of countries with at least one unicorn has doubled from 24 to 48, whilst the number of cities with at least one unicorn has grown from 118 to 271.

Hurun Report Chairman and Chief Researcher Rupert Hoogewerf says, “The three years since Covid began have been the most dynamic years in history when it comes to unicorns, with the world minting one unicorn every day for the past three years to take the total of known unicorns in the world to over 1360. Despite the slowdown in the economy, the world has minted over 500 new unicorns in the past year, just under ten a week.”

The world’s unicorns are disrupting financial services, business management solutions and healthcare. The total value of all known unicorns in the world is USD 4.3 trillion, more than the GDP of Germany, double that of unicorns pre-Covid.

79% sell software and services, such as FinTech, SaaS, E-commerce and AI, whilst 21% have a physical product, led by New Energy, Biotech, F&B and Semiconductors, the report highlights.

Why Number of Unicorns Triggered Post-Covid?

The unicorns from some sectors like Fintech, e-commerce, healthcare got a boost post-Covid. The pandemic has forced many people to work from home, learn remotely, and shop online. As a result, startups that provide digital services, such as e-commerce, online learning platforms, and remote work tools, have seen an increase in demand.

There was also a paradigm shift in consumer behaviour as people started focusing more on health, wellness, and sustainability. This has created opportunities for startups in these areas, such as telemedicine, wellness apps, and eco-friendly products.

The pandemic made it easier for startups to launch and operate remotely, with lower costs and fewer bureaucratic hurdles. This has allowed more entrepreneurs to start and scale their businesses. Also, the fintech startups got a massive surge in demand as people shifted to digital payments during the global lockdown.

Overall, the pandemic has created both challenges and opportunities for startups. While some have struggled, others have adapted and even thrived in this new environment.

The Hurun report highlights that this year Fintech overtook E-Commerce as top unicorn-producing industry since Covid.