Did the Unicorns actually add Value?
In FY20, India’s 68 Unicorns spent cash of over ₹138,000 crores, posting a total net loss of over ₹41,000 crores. Now before you write off all these expenses as “cash burnt”, let’s zoom out and look at the bigger picture.
Think of it this way, money spent by one Startup is creating a market for another. So, the huge amounts of money spent by Startups is brewing up an economy in itself comprising of stakeholders ranging from digital marketing to data security firms, from Logistics to SaaS companies, and so on. Here are a few examples to explain this better:
With the rise in the volume of D2C and Ecommerce players, a bigger market is getting created for Logistics companies (as their services will be sought to make deliveries to customers) and for Digital Marketing firms (as they tend to spend heavily on marketing).
A rise in Delivery & Logistics Startups in turn has created a massive gig economy in our country, one which was almost non existent 5 years ago.
A general increase in the volume of Startups in the country has created a huge market for SaaS, Enterprise Tech and Data Security firms.
And above all, India’s tech ecosystem has created top quality job opportunities for a generation that loves to be challenged, pushing them beyond their limits and inspiring them to innovate in every step of the way.
You get the idea right? So we disintegrated the ₹138,000 crores into expenses that generated opportunities for these stakeholders. Have a look:
Employees - The employees working at startup Unicorns got the biggest chunk of the startups expensing amounting to over ₹16,625 crores. As of March 2021, the Indian Unicorns had over 169,000 employees in their payroll.
Events and Marketing & Advertising Firms - Startups tend to spend huge amounts of money on marketing in their attempt to Blitz-scale. Naturally, the Unicorns spent a whopping ₹12,000+ crores on Marketing, thereby giving a huge boost to companies that provide marketing and advertising services. Even events like IPL have seen huge influx of sponsorships from Startups (Dream 11 was the title sponsor of IPL in 2021).
Legal & Accounting Professionals - Just when you thought tech will make you redundant as a professional, here's a reality check - the Unicorns spent over ₹1790 crores in a year towards legal, accounting, business consultancy and audit expenses. That's a huge market in itself and reminder to professionals that staying updated amidst changing times might as well pay off in the long-run.
Logistics Partners - The Unicorns spent over ₹1400 crores towards freight, packing and packaging for goods delivered virtually across the country. This has given a huge boost to logistics companies, which is also evident from the rising number of startups in this space.
Government - It's a common misnomer that if the startups are not profitable, the government must be barely making any revenue out of them. But here's the catch - the state and the central governments still charge licensing fees, customs duty, GST (in cases where input is not available), stamp duty, filing fees, etc. from startups. All of this accounted for a revenue of over 600 crores to the Government in FY20.
This article is a part of the December'21 edition of our Startup Newsletter. Here's the complete publication: