China’s VC investments in Indian start-ups hit $5.6 billion in 2018

The inflow of Chinese venture capital (VC) funds into India continues to grow exponentially despite the geopolitical tensions between the two countries. The Chinese VC funds surpassed those coming from the US and Japan in 2018.

According to data collated by research and analytics platform Tracxn, the China’s VC investment into the Indian start-up ecosystem has increased five-fold at $5.6 billion in 2018 compared to a mere $668 million in 2016 and around $3 billion in 2017. The increased inflow to Asia’s third largest economy came in at a time when Prime Minister Narendra Modi launched an ambitious Startup India programme that led to a spurt in the number of tech start-ups in the country.

Top investors

Among the top Chinese investors that focussed in the Indian market were Alibaba, Shunwei Capital, Fosun Tencent and Xiaomi, which wrote larger cheques last year compared with the previous year. The data also showed that sectors such as consumers, food-tech, logistics, retail, artificial intelligence, Internet of Things and fintech, attracted the maximum investments from the Chinese VCs thus helping Indian start-ups to boost their valuations.

However, even though the geopolitical situation between the two neighbouring countries is worsening by the day, experts believe the trade relation is not going to get impacted and more so the investments into the start-up space is likely to grow.

According to the Tracxn data, the Chinese VCs have poured in about more than half-a-billion since the beginning of this year. Experts feel that for India, which is a high growth and developing nation, capital is much needed and that capital from all sources is welcome. Further, Chinese investors not only believe in just writing cheques but also help startups in their growth by providing knowledge and expertise.

Rehan Year Khan, Founder and Managing Partner at Orios Venture Partners, told BusinessLine that “India is a large and exciting market. The Americans, Europeans and Japanese have always been actively investing here, now the Chinese have joined in. India does not have any trade tension with China, thus business between the two nations will improve.”

He further added that the Chinese capital requires no major privacy and security treatment from any other capital and India has enough safeguards with regards to all investors.

Vikram Gupta, founder of IvyCap, said the Chinese investments are likely to grow. “It may not have a direct impact due to geopolitical situation as entrepreneurs may benefit due to larger capital flowing in. But we should avoid opening sensitive areas for investments to Chinese investors including security, companies catering to defence,” Gupta added.

According to a report by KPMG, In China, corporate VC is growing rapidly, and more companies have VC arms and they are actively looking for disruptive technologies within their country and outside.

In the first Startup India Investment Seminar held in Beijing last year, 12 Indian start-ups participated out of which four secured funding from Chinese venture capitalists to the tune of $15 million.

Besides, several Chinese VCs, including the Alibaba Group, have fellowship programmes where they provide entrepreneurs from developing countries like India with right skills for their businesses. Recently, four Indian start-ups — Zefo, Healthy Buddha, NowFloats and Grozip – were among the 38 Asian firms which completed the fourth edition of the Alibaba eFounders fellowship programme.