Chinese investments in Indian start-ups cross $5 b in 2018

Chinese investments into India continues to grow exponentially despite the geopolitical tensions between the two countries. Chinese VC funds pumped in over $5 billion in 2018, surpassing investments coming into the country from the US and Japan.

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

Among the top Chinese investors were Alibaba, Shunwei Capital, Fosun Tencent and Xiaomi. Sectors such as consumers, food-tech, logistics, retail, artificial intelligence, Internet of Things and fintech attracted maximum investments thus helping Indian start-ups boost their valuations.

Despite worsening geopolitical situation between the two neighbours, experts believe trade relations will not get impacted and investments into the start-up space are likely to grow. As per the Tracxn data, Chinese VCs have poured in 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 is welcome from all sources.

Further, Chinese investors not only believe in just writing cheques but also help the start-ups in their growth by providing knowledge and expertise.

Rehan Year Khan, Founder and Managing Partner at Orios Venture Partners, told BusinessLine “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 and India has enough safeguards with regards to all investors.

Sensitive sectors

Vikram Gupta, founder of IvyCap, said Chinese investments are likely to grow in the absence of large Indian investors.

“ Entrepreneurs may benefit from huge capital flowing in. But we should avoid opening sensitive areas for investments to Chinese investors including security and companies catering to defence,” Gupta added. According to a KPMG report, 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 Start-up India Investment Seminar held in Beijing last year, 12 Indian start-ups participated of which four secured funding to the tune of $15 million from Chinese venture capitalists.

Several Chinese VCs, including the Alibaba Group, have fellowship programmes for entrepreneurs from developing countries like India. Recently, four Indian start-ups — Zefo, Healthy Buddha, NowFloats and Grozip — were among the 38 Asian firms that completed the fourth edition of the Alibaba eFounders Fellowship programme.