Zombie Unicorn is a term for companies that keep going after funding runs out but don’t actually grow, and investors no longer see them as attractive nor worth a punt.
The Indian startup culture is going through a Zombie Unicorn phase at the moment after a blockbuster year and a startup boom. According to Reuters Analysis, here’s what we know so far.
The valuation of Meesho, the Indian e-commerce rival of retail giant Amazon, more than doubled last year to $5 billion, after marquee investors such as SoftBank and Fidelity pumped in hundreds of millions of dollars.
They aimed to ride a boom in India’s tech startups, which raised a record $35 billion in new funds in 2021, but the tide has since turned, as corporate governance concerns loom large for investors facing a new uncertainty in global markets.
“We haven’t seen a slowdown like this in at least five to six years. It is going to be brutal,” said Anand Lunia of venture capital firm India Quotient, an investor in more than 70 startups since 2012.
“I expect to see a lot of zombie unicorns. Companies which became unicorns but have no business models have stopped hiring – they are not dying, but will become irrelevant.”
Now Meesho is trying to raise debt and cut expenses after efforts to raise fresh funds of $1 billion floundered, making investors wary of its monthly cash burn of $45 million and stiff competition, two people familiar with the talks told Reuters.
Meesho did not respond to a request for comment.
But its struggles are among the first signs of a painful future awaiting many Indian startups.
Plummeting Indian tech stocks are a worry, but investors spooked by fears over corporate governance are stepping up scrutiny during due diligence efforts, which delays funding rounds, two venture capital executives said.
And there are concerns that valuations in India are already too high, even when startups’ business models are being led by discounts and there is a bleak outlook for revenue, they added.
