BJP Leader Ravi Shankar Prasad Incorrectly Defines Unicorns
Former Union Minister claims that a start-up becomes a unicorn when it has $1 billion in revenue, but the criteria is $1 billion in valuation
Senior BJP leader and former Union Minister for Electronics and Information Technology Ravi Shankar Prasad, in an interview, wrongly described unicorns as start-ups with a revenue of $1 billion or Rs 7,000 crore. The term 'unicorns' refers to the start-ups that attain a valuation of more than $1 billion, and not revenue.
"India's start-ups are waving the country's flag around the world. 100 start-ups have become unicorns," said Prasad. He then, in an attempt to take potshots at Congress leader Rahul Gandhi, explained what unicorns are and erred. "I don't know if Rahul Gandhi knows the meaning of unicorn, it will be good if his people tell him. Unicorn means the (startup's) revenue is $1 billion, or Rs 7,000 crore," he added in an interview with AajTak.
The Union Ministry of Commerce and Industry announced on May 6, 2022 that India witnessed the emergence of its 100th unicorn and that one out of every 10 unicorns globally were started in India. In this announcement, the ministry described unicorns as "the rarest of the rare start-ups who become unicorns attaining a valuation of more than $1 billion".
Invest India, the Centre's national investment promotion and facilitation agency, also describes unicorn as "a term used in the venture capital industry to describe a privately held start-up company with a value of over $1 billion".
So, it's the valuation that qualifies a start-up as a unicorn, and not the revenue as Prasad claimed.
Moreover, the rupee is no more valued at Rs 70 per USD. It has dropped to over Rs 79, which means $1 billion converts to Rs 7,959 crore.
Several Opposition leaders reacted to the BJP leader's gaffe on Twitter.
Revenue Vs Valuation
The revenue of a company is the total income that it generates. Its valuation or value includes assets and the funding or investments that a start-up might have received. Venture capitalists and investors who have participated in the financing rounds of a company develop its valuation.
But a unicorn's valuation is not strongly related to its actual financial performance or other fundamental data. For example, Flipkart is the highest valued Indian unicorn at $37.6 billion, but it was placed third on the list of the Top 10 loss-making unicorns in 2021 with losses worth Rs 2,446 crore in FY 2021.
Only 18 Indian Unicorns Profitable
India's Unicorn tally reached 105 last month. In 2022, 19 new Unicorns were born with a valuation of $24.7 billion. The government, on several occasions, has lauded the boost given to the start-up ecosystem in India.
Since all unicorns are start-ups, their value is primarily based on their growth potential and expected development, and not actual income. According to a report from finance data tracking platform Fintrackr, only 18 Unicorn start-ups attained profitability in fiscal year 2021, 57 were loss making, and 25 did not disclose their revenues.
In fact, funding momentum in the start-up ecosystem has been fizzling out, reported Inc42. The first half of 2022 saw only $19 billion being raised by Indian start-ups, which was 41% less than $32 billion raised in the latter half of 2021.
FactChecker wrote to Prasad asking for clarification on his comment, but did not get a response.