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New additions in the coveted unicorn list declined sharply in 2023, indicating a slowdown in the Indian startup ecosystem, a report said on Tuesday.

India added only three unicorn startups having a valuation of over $1 billion in 2023 against 24 in the year-ago period, as per the ASK Private Wealth Hurun Indian Future Unicorn Index 2023.

The slowdown in unicorn additions is indicative of a “slowdown in India’s startup ecosystem”, the report — which comes amid a slowdown in investor interest in what is being termed as “funding winter” — said. The overall number of unicorns also declined to 83 from 84 in the year-ago period.

ASK Private Wealth CEO and Managing Director Rajesh Saluja said unsustainable business models adopted by startups have led to a dip in valuations, but stressed that funding to the right companies continues.

Hurun India Chief Researcher Anas Rahman Junaid, however, said that the Indian startup story has high potential, and he sees the overall number of unicorns in India touching 200 in the next five years.

He said China has over 1,000 unicorns, and startups will be very important if India were to grow economically.

Junaid said the overall number of startups in the list, which has startups valued at over $250 million, stands at 147 in 2023 compared to 122 in the year-ago period.

A total of 18 companies got dropped off the list last year, but there were over 40 new additions as well, as per the report. Saluja said the overall funding to the startups on the list grew by 6% to $18.8 billion.

Junaid explained that Hurun used regulatory filings and interviews with startup investors to arrive at the valuations and then subsequently make the index of unicorns (valued at over $1 billion), gazelles (valued at over $500 million and likely to turn unicorns in three years) and cheetahs (valued at $250 million likely to turn unicorn in five years).

There were 51 gazelles and 96 cheetahs in 2023, against 51 gazelles and 71 cheetahs in 2022, as per the index.

Saluja said recent troubles on the governance front in some startups like BYJU’S will not impact funding to the broader Indian startup ecosystem and pointed to high interest among high net-worth individuals to invest in funds, which will be deployed in startups.

Earlier, he said it used to take a year to raise a fund of Rs 1,000 crore, adding that the same can now be raised in under four months.

Peak XV Partners, which was formerly known as Sequoia, is the biggest investor with stakes in 37 unicorns, the report said, adding that Bengaluru continues to be the startup capital of India by being home to 53 probable unicorns.

Quick commerce startup Zepto’s twenty-year-old co-founder Kaivalya Vohra is the youngest co-founder in the index. The 147 companies featured in the index employ over 1.02 lakh people.