Indian start-ups: A market for lemons?

Abstract

Almost 1000 startups have shut down in India since 2014. This is a whooping 40% of the total 2281 startups that actually began operations in the same period1. These failed startups range across sectors, which include logistics, e-commerce, food delivery, business intelligence etc. With 1000+ startups cropping up every year, it is surprising to see there are only 7 companies that can be called unicorns (companies having $1B+ valuation) since 2007 (Exhibit 1). While this may not look too bad, it is quite low keeping in mind the potential, which is related to India’s startup ecosystem. To put things in perspective, China has 24 unicorns.2 The sizes of Chinese unicorns are comparable to US Startups (think Alibaba for Amazon and Baidu for Google).