The unicorn race: India catches up with China in birthing successful startups

Trade tensions with the US and a dip in VC funding have slowed down the emergence of unicorns in China during 2019, meaning good news for the Indian startup ecosystem.

Thimmaya Poojary

Sameer Ranjan Bakshi

The unicorn race: India catches up with China in birthing successful startups

Thursday October 24, 2019,

6 min Read

For some time now, India has been lagging way behind China in the emergence of unicorn startups – those private entities valued at $1 billion and above. The tide finally seems to be changing this year. Now, data indicates, India is matching China in the growth of unicorn startups. This has partly been due to an upswing in investor interest in India, diverted from its northern neighbour after a slowdown there.

A Bloomberg report published in September stated, “Just seven Chinese unicorns had been born in 2019 as of June 2019, versus 30 in all of 2018.” In contrast, data sourced by YourStory reveals that India has produced eight unicorns to date this year, with many more likely to emerge in the remaining months.

These figures indicate the impact of the global macro-economic environment, with China’s growing tensions with the United States and slowdown in venture capital investment likely diverting benefits to the Indian startup ecosystem.

A suddenly fragile China

In the past few years, a considerable gap has been recorded between the startup ecosystems of India and China in terms of the funding received by fledgeling companies, the emergence of unicorn companies, and entities going for public listing.

According to various reports, China created more than 30 unicorns in 2018 (CB Insights, which tracks startups across the world, puts that number at 38), whereas India saw just eight of them during that period.


The trends now seem to have dramatically reversed. China is witnessing plummeting VC investments over its trade tensions with the US and concerns over valuations of its startups. For the second quarter of this year, venture investments crashed by 77 percent to $9.4 billion and the number of deals almost halved to 692, according to reports from market research firm Preqin. As a result, the highly-valued Chinese startups have put a halt on their fund-raising plans.

Indian unicorns make a mark

In 2019, India has witnessed a steady rise in the emergence of unicorns, across the segments of logistics, grocery delivery, B2B, and mobility. The eight unicorns recorded in the country thus far this year are Delhivery, BigBasket, Ola Electric, Druva, Icertis, Dream11, CitiusTech, and Rivigo.


This development could likely be sustained and bode well for the Indian startup ecosystem, experts say. The environment has also been boosted by investors from China looking for greener pastures.

V Balakrishnan, Chairman of Exfinity Ventures, says, “The slowdown in China’s startup ecosystem is likely to increase the funding momentum of investors from that country in India as they seek new opportunities.”

Until now, Chinese investors like Tencent, Alibaba and its affiliate Ant Financial, and Shunwei Capital, among other prominent names, have made investments in Indian startups like Paytm, Ola, Swiggy, Zomato, BigBasket, Meesho, etc. According to reports, Chinese investments in Indian startups crossed $5 billion in 2018.

Not just unicorns

On a different but related note, 2019 saw India surpassing China in the fintech segment, too. According to the Global Fintech report of CB Insights, India recorded 23 fintech deals during the second quarter of 2019, compared to China’s 15. However, China had marginally higher investments in the segment at $375 million during this period, against the $350 million in India.

According to industry observers, a sense of saturation is seen in the Chinese market. The prospects are therefore brighter for a country like India that is on the cusp of a digital makeover and offers a plethora of related opportunities for investors across segments.

A gap remains

However, seen from a larger and long-term perspective, India still lags behind China in the birthing of unicorn companies. Data from CB Insights shows the top two global spots of the most valuable unicorns occupied by Chinese ByteDance, the creator of video-sharing app TikTok, and Didi Chuxing, the ride-hailing giant.

Unicorn ranking

The Hurun Research Institute, in its recent inaugural ‘Hurun Global Unicorn List 2019’, stated India is placed third in the global unicorn list with 21 of the world’s 494 unicorns. China takes the top spot with 206, followed by the US with 203.

These statistics would indicate that India has a lot of ground to cover to catch up with the world’s unicorns, with China still looking much stronger.

Anas Rahman, MD and Chief Researcher, Hurun Report India, says, “Even though there is a trade war with the US going on, the demographic dividend in China is so huge that they can still produce a lot of wealth-creators in the form of unicorns.”

Challenge of seed funding

Speaking on some of the impediments that startups in India face, Anas says, “In the Indian context, one of the biggest gaps we see is the availability of early-stage funding. There are quite a number of funds that would come at Series A and B levels. But, right from seed stage to Series A is where countries like China and the US stand out as they have a lot of high-risk capital available.”


Analysts aver that the trade tensions with the US have had some bearing on the Chinese rankings. Rupert Hoogewerf, Founder of Hurun Research Institute, says,

“There is some sort of decoupling happening between US tech companies and Chinese tech companies. Recently Google pulled its apps and services from Huawei’s new devices. The US government also widened its trade blacklist to include some of China’s top artificial intelligence startups.”

Enough gunpowder in China

According to Rupert, the US-China trade fissures are unlikely to have much of a long-term impact on the Chinese startup ecosystem, as a majority of the global unicorns today are located in that country today.

Speaking about the slowdown in VC funding in China, the Chief Researcher of Hurun Report added, “I don’t feel the funding into the Chinese ecosystem per se has been impacted by the trade war. Perhaps there is a bit of a slowdown; but, there is a strong ecosystem and China houses a greater number of unicorns, compared to the US today. That will foster and create and mentor more young companies”.

Meanwhile, the race to create unicorns looks set to continue in both India and China. Anas believes India is around 10 years behind China in terms of the maturity of the startup ecosystem.

“I am confident though, by the end of this calendar year, India will add another one or two startups to the coveted unicorn rank,” he says.

(Edited by Athirupa Geetha Manichandar)