Made in India, funded by China: Investors woo desi start-ups

Chinese investors are aggressively making inroads into India, especially via the start-up route.

China has emerged one of the fastest-growing sources of Foreign Direct Investment (FDI), especially in the Indian start-up ecosystem where the Dragon is showing unusual interest.

The country is fast catching up in terms of investment in India. It was the 17th-largest investor in India in 2016, up from 28th in 2014 and 35th in 2011, according to India’s official ranking of FDI inflows.

In 2017, the Chinese invested an estimated $2,000 million (₹12,600 crore), compared with $700 million (₹4,480 crore) a year before, tripling the funding in a single year.

In the past three calendar years, Chinese and Chinese-origin investors have poured in about $3.7 billion (₹23,600 crore) into Indian start-ups, according to data sourced from VCCEdge and Tracxn. Its major beneficiaries are around 25 start-ups, including Truebil, ixigo, Paytm, Flipkart and MakeMyTrip.

And unlike western investors, the Chinese are not fly-by-night investors who make a quick buck and scoot after booking profit after the lock-in period. They usually stay for the long haul, an expert said.

‘Balancesheet investors’

“They are balancesheet investors, not looking for exits,” Shubh Bansal, co-founder, Truebil, told BusinessLine. The Mumbai-based pre-owned car marketplace got $3 million (₹.19.13 crore) in follow-on Series A funding round from China’s leading venture-capital fund, ShunWei Capital, in 2017 by way of equity investment. “They understand India better than their western counterparts,” he added.

Bansal said Chinese investors are looking for “strategic investments” in India where a billion people are expected to soon be online. So they are not investing much in e-commerce. “The Chinese are patient investors. It took them four months of due diligence in our case,” Bhansal said.

Another example is Indian social network ShareChat, which received $20 million (₹127 crore) in funding in 2017. Sharechat is focussed on Indian languages to attract mass content.

Leveraging the Chinese ecosystem with the help of investors is turning out to be a game-changer in terms of knowledge sharing, not just sourcing capital. Many feel Chinese entrepreneurs are ahead of their Indian counterparts and therefore give local entrepreneurs an opportunity to leverage their experiences. Desi entrepreneurs with big international dreams are banking on Chinese investors for both learning and growth.

For Chinese investors, Indian start-ups present a range of opportunities. Familiar and already tested business models and finance-based association work well for the companies. A potentially slowing Chinese economy and paucity of investment opportunities in their own country also bring them to their neighbour’s burgeoning start-up culture.