What happens to a startup unicorn that doesn’t quite live up to its potential? Like its equine cousin, does it gallop off into the sunset? Or beat a reluctant retreat, carrying its once-heralded, now-forgotten founder astride? Take Practo, for example.

While not quite a unicorn, the Bengaluru-based healthcare platform provider was seen as a fast-rising star a few years back. In early 2019, market intelligence company CB Insights picked Practo as a future unicorn future unicorn CB Insights 50 Future Unicorns Of 2019 Read more . It was one among a handful of Indian companies in a select list of 50 global startups demonstrating “high momentum”. 

One could argue that this honour was well-deserved. Over the past few years, Practo had been on a tear. Over the course of one year, starting in  mid-2015, the company managed not one but three funding rounds—raising $115 million in total, taking its valuation up 4.5X to $660 million by October 2016.

Given the big valuation, large funding chest, and a general impression that Practo was the market leader in healthcare—a lucrative segment of a big market—getting to a billion dollars in valuation should have been a shoo-in.

Things didn’t quite turn out that way.

Earlier this month, Practo raised a new funding round. Coming nearly four years after its previous funding round, an unusually long interval for a “hot” startup, it was significant for a number of reasons. But most of all, it stood out for the valuation figure: $335 million, which is about half Practo’s previous valuation from four years back—that’s a long way away from being a “future unicorn”.

What happened to Practo in these four years?

What does this “down round” represent?

What happens from here?

Practo’s perils of plenty

As early as 2016, even as Practo was valorising itself as the #1 healthcare startup in India, it was apparent that that company’s business fundamentals were far behind the public posturing. 

The Ken pointed out pointed out The Ken Is Practo in the pink of health...or suffering from gluttony? Read more  that Practo’s actual operational revenue for the year ending March 2016—after deducting the fees received from its holding company—was just Rs 23 crore ($3 million). That’s less than 3% of the total funding raised at that point of time, and a minuscule figure for a startup that employed 1,500 people ostensibly servicing 50,000 paying customers.

AUTHOR

Sumanth Raghavendra

Sumanth is a serial entrepreneur with more than eighteen years experience in running startups. He is currently the founder of Deck App Technologies, a Bangalore-based startup attempting to re-imagine productivity software for the Post-PC era. Sumanth’s columns appear regularly in leading publications. He holds MBA degrees from the Indian Institute of Management, Bangalore and Thunderbird, The American Graduate School of International Management, USA.

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