Is the unicorn boom slowing down in 2022?

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Hyderabad: Investors and venture capitalists have taken a cautious approach with a focus on sustainable valuations and profitability this year so far. There’s been a negative impact on the startup ecosystem and their pace to becoming unicorns has been slow. In fact, GlobalData’s numbers indicate that the unicorn boom is slowing down in 2022 compared to 2021.

The unicorn boom slowing down in 2022

In Q2 2022, 85 unicorns were created compared to 127 unicorns in the previous quarter. Despite the slowdown, 2022 is ahead of 2020. A total of 521 startups from 2021 have maintained their unicorn status, up by five-fold as compared to the 100 unicorns from 2020, according to GlobalData.

“The startup ecosystem, which was on a unicorn creation spree last year, is currently facing a funding crunch as investors are looking for sustainable business models, valuations, and a path to profitability amid the volatile market conditions,” says Kiran Raj, Practice Head of Disruptive Tech – GlobalData.

The unicorn boom in 2021

“The unicorn boom in 2021 can be attributed to the funding frenzy fueled by the rapid adoption of the technology and innovative offerings by startups in areas such as edutech and e-commerce gaining relevance in response to the COVID-19 impact and implications,” says Prasad Kakade, Senior Disruptive Tech Analyst -GlobalData.

In 2022, key markets have witnessed the unicorn boom slowing down. The US saw unicorn creation declining from 77 in Q4 2021 to 47 in Q2 2022.

In Asia-Pacific, China reported a drop in unicorn births from eight in Q4 2021 to four in Q2 2022, and India too reported a decline from 14 to four during the same period.

GlobalData’s Disruptor Intelligence Center offers predictive startup intelligence to spot tomorrow’s winners today. The AI-driven model boasts success in accurately predicting over 40% of the 500+ startups that became unicorns in 2021.

According to the model, technology and communications, financial services, pharma and healthcare, and consumer packaged goods will account for over 80% of potential unicorns. The technology and communications sector is set to generate the highest number of unicorns, followed by financial services.

The top five themes to have the highest number of unicorns are predicted to be artificial intelligence, followed by digital media, cloud, fintech, and e-commerce.

“The US, followed by India, China, the UK, and Germany will remain the top five unicorn hubs. The US will continue to dominate half of the world’s unicorns and India is expected to surpass China in terms of the total number of unicorns in the future,” says Kakade.

“China is expected to slow down from the current levels of the unicorn boom for various reasons such as the zero-Covid policy, crackdown on technology firms due to antitrust and security concerns,” concludes Kakade.

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