The rise of unicorns with a shark fin: mapping evolving growth patterns of Indian startups

India’s startup sector made the Big Leap Forward around 2007-2009 with the birth of companies like Flipkart, InMobi, etc. This was followed by the venture capital ecosystem shaping up rapidly, which led to the birth of several more ‘unicorns’ like Ola, Paytm, Quikr, and Policybazaar, and ‘soon-to-be unicorns’ such as online grocer BigBasket, logistics network Rivigo, and hospitality chain OYO. Indian startups have gained the attention of global investors like SoftBank, Alibaba, Tencent, and others that have backed numerous late-stage companies recently.

The unicorn surge can be attributed to better internet infrastructure, the emergence of smartphone users, and several ubiquitous communication platforms like iOS and Android that have enabled app-based businesses to scale rapidly.

In the 1980s or 1990s, companies exhibited a growth pattern best depicted through a bell curve where a product/company takes a five-customer segment lifecycle (see image below). Now, markets are defined and conquered with a ‘shark fin’ burst of domination with just two customer segments. This shortened life cycle is primarily the result of rapidly spreading digital disruption in industries largely untouched by the first wave of Internet transformation.

The shark fin growth pattern’s adoption can be observed with companies like Swiggy, Flipkart, and Ola. Technological improvements (access to the internet and mobile phones becoming ubiquitous) have changed the speed at which new innovations penetrate markets. These market-disruptive companies do not exhibit the nature of the bell curve taking five customer market segments; it is mostly shrunk to two segments – ‘trial users’ and ‘everybody else’. The pattern for growth and product adoption with new companies must have a life cycle that is not a gentle sloping bell curve but is more like a cliff.

The shark fin curve has sharply compressed the bell curve. There are two reasons the phenomenon has taken place, as described by Harvard Business Review:

1. The customer is well aware of the products (software, consumer, etc.) in the market through information available on social media. The lowered transaction cost for customers and customer acquisition is an outcome of readily available market information on various digital platforms. The customer is informed about your product/services (before or after launch), about what other peers are buying, other substitutes in the market etc. If the customer sees an immediate benefit or use, they will adopt the product/service immediately.
2. Digital products or platforms become obsolete. With continued improvements in efficiency, price, performance, or size, there is a shorter cycle of new versions and innovations. The dramatic pace of technological transformation rather than the orderly evolution of industry standards now determines the speed with which consumers and businesses replace pretty much everything.

As the number of unicorns rises, disruptive products rise rapidly, with large customers consuming them. With the shark fin growth curve, companies operate as the flippers of their industry. Take the case of Flipkart, Ola, Paytm, and the like, for example, controlling their respective industries’ speed, direction, and destination. At some point, these companies will need to understand where new disruptors come from and how they enter and exit the market. To maintain market position, these companies will likely have to again launch new products to create a shark fin growth...again!

Shalini Prakash is a Venture Partner at 500Startups where she heads the India investments and portfolio.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)