Secrets To Chinese Investment in Indian Startups – Even In This Down Economy

Over the years, it is clearly seen that China is very interested in India. This can be easily seen with the help of the large investment made by the Chinese companies in the Indian Start-up ecosystem. In India, China’s tech giant companies and venture capital funds have made a big Chinese investments in India – largely in tech start-ups. These investment are made on evaluating some of the parameters which are acting as the ultimate success for the Chinese investing forums. They are:-

  1. Value of Equity Invested- according to the business model.
  2. Target Companies- according to the USP and the Similarity with other start-ups.
  3. Location of investment for better acquiring the customers.
  4. Nature of business- depending upon the people interest and other direct and indirect investment techniques.

Present Scenario

Present scenario of Chinese Investment in Indian Startups Over the years, it has been seen that the Chinese start-up companies are getting a great success in the Indian market. TikTok, owned by ByteDance, is already one of the most popular and most downloaded app in India and the world, overtaking YouTube. Xiaomi handsets are bigger than Samsung and Apple smartphones. The companies are having a large customer base making themselves the market leaders in their sectors respectively. All these Chinese start-ups are working behind the Indian start-up by providing the investment to these Indian start-up companies in the Indian start-up ecosystem. Chinese investment in Indian tech start-ups is making an impact disproportionate to its valuation, by deeply penetration of technology across sectors in India.

Also Read: How does Crowdfunding Work to Raise Money for Startup

The statistics of the past years says, Oyo and Ola and many more. 18 out of the 30 Indian Unicorn start-ups have a Chinese investor behind their success. This means that China has embedded itself deeply in the Indian ecosystem which is helping them in getting the large profits. The Chinese companies and venture firms made the investment in about two dozen Chinese tech companies and firms which are having more scope of success according to them. These investing giants consist of the companies and firms like Alibaba, ByteDance and Tencent, which are completely established in the market and earning the great profits. These Chinese Companies have invested their money in about 92 Indian start-ups, including some of the unicorns such as Paytm, Ola, Dream 11, Byju’s and many more.

Division of the Chinese investors

There are two groups of Chinese investors which are investing in the Indian start-ups. These Chinese investment in Indian Startups have made these companies a giant in the Indian startup ecosystem. They are:-

1) Chinese VC funds, such as CDH Investments, Ward Ferry, SAIF Partners and Hillhouse Capital, mostly based in Hong Kong. They are akin to professional global investors, such as Sequoia or Softbank, and look for a bigger financial returns according to the investment.

2) Tech giant companies, like Alibaba, Tencent and Xiaomi, which want a serious presence in the Indian market, just as Walmart (via Flipkart) and Amazon do but in a virtual manner without any burden.

These Chinese investors have invested in many Indian start-ups. Some of the biggest Indian start-ups with the funding involved by these Chinese groups are stated briefly in the given table.

Chinese companies and firms Investments in Indian Startups
Chinese companies and firms Investments in Indian Startups

Some f the big Chinese VC firms and their investment in the Indian startup ecosystem are:-

Chinese VC firms

This shows that the Chinese investors and VC firms are keenly observing the the Indian startup ecosystem and this can be easily proved by the above statistics which tells that these Chinese VCs are investing almost in all the Indian startups during their initial period of their startup. This Small-Small investment in almost all the startups has now become big amount in total.  

Reason behind the investment in Indian start-ups

These Chinese companies are investing in such companies mainly due to 3 reasons. They are:-

1) Difference in the Currency Value

Powerful Chinese currency
Powerful Chinese currency

It is clearly seen that the Chinese currency is having the higher value than the Indian currency. The Chinese currency is almost 10 times larger than the Indian currency. This is the main point behind the Chinese investment in Indian start-ups. This creates a plus point for the Chinese investors as, they have to invest less while investing in the Indian start-ups as compared to any Chinese investment. Secondly, these Chinese companies invest to the Indian start-ups having a similar concept eg: Alibaba invested in Paytm. This helps the Chinese investors to make a trade of technologies with the invested start-up. So, the Chinese investors are able to get their invested in one or the other form plus also gets the partnership in the start-up with the help of the shares they purchased, which ultimately acts ROI for these investors.

2) Data

Data security and data privacy
Data security and data privacy

It is the well-known fact that data is the new oil. Chinese companies such as Alibaba and Tencent have their own ecosystems which are ready for use. This includes the online stores, payment gateways, messaging services, and many others. These Chinese investors can pull the data of the Indian users. This can be done with the help of the position in the company (due to the investment) which can ultimately leads us to the loss of control over data. This data can be used in many ways and in different situations depending on the need of attraction of the customers having similar taste. This data has its own value in the market and after the loss over the data, there will be no privacy left for the existing customers of the service.             ‌

Also Read: What is Web Scraping & Is it Legal?            ‌‌

3) Restriction over the Platform control

Restriction over Foreign Players
Restriction over Foreign Players

China is having a very large amount of restrictions over the companies which donot belongs to the Chinese state. China is having a closed internet service or the Chinese internet service which almost act as an intranet. This restricts outsiders and is closely monitored and controlled by the state. Many companies like Facebook, are banned in China and other companies working in China like Apple, have to undergo many restrictions. Due to this many Chinese companies like Alibaba and Tencent are able to get all the benefits of this system. By restricting access to foreign players, China is able to create its own working surfaces. So, these Chinese investing companies and firms are trying to replicate their internet ecosystems in India. Once, they are able to get success in this task then they will be able to dominate over the Indian market which will directly affect the world’s market.

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About Yash Gupta