Indian Startups Benefitting from pressure on Chinese Tech Companies
STORIES, ANALYSES, EXPERT VIEWS
Indian technology startups, which are getting record inflows of venture capital this year, will gain further as global capital moves away from Chinese tech companies that are witnessing pressure from their government, according to many founders and investors.
The Xi Jinping-led government’s continued crackdown of Big Tech firms could also trigger long-term changes in the way large internet companies are regulated globally, they told ET. "China gets more venture capital than India. Now, if the Chinese funnel is getting choked, it will go somewhere and with so much liquidity, emerging markets like India will get that allocation," said Ashwin Damera, cofounder and chief executive officer of online executive education platform Eruditus. The startup saw its valuation jump four-fold to $3.2 billion after raising $650 million from SoftBank, Accel US and others, earlier this month.
India is the third biggest startup market—after the US and China—for investors to park their capital in, at a time when there is increased liquidity in the market.
So far this year, the country has already seen 25 new unicorns—startups valued over $1 billion—and nearly $20.76 billion has been raised across 583 deals as of August 20, according to data provided by industry tracker Venture Intelligence. In comparison, $11.1 billion was invested in Indian startups in 2020, with 12 companies turning unicorns.
With the China tech crackdown forcing global risk investors to look elsewhere, it seems the funding tap for Indian startups isn’t going to run dry anytime soon.
"There is no question that the US and China are the biggest tech markets in the world but increasingly people are paying attention to India and feel that it would take the right lessons from China to grow faster and, at the same time, also provide opportunities for innovations that will happen locally," Hans Tung of GGV Capital, a Silicon-Valley based venture firm, told ET in a recent conversation.
The ongoing China tech crackdown has resulted in over half a trillion dollars being wiped out from Chinese tech stocks in a week, including from Alibaba Group, Kuaishou Technology and Tencent Holdings. Last week, the Chinese government introduced tougher data protection laws mandating how technology companies handle user data, in a move that has alarmed investors. The tough regulatory oversight deepened last month when China, in a surprise move, banned private investments in the $100-billion education sector by stating that platforms teaching school subjects cannot receive foreign investments.
Concerns around tech regulations globally: Varun Dua founder of insurtech startup Acko, said that while more capital seems to be diverted to India, China’s tech clampdown on its domestic technology sector may have a long-term impact, "especially on the gig workforce labour rules, data privacy and usage, corporate structures and more regulations for fintech”.
Even as they gain from the current rush of money, Indian entrepreneurs are of the view that eventually the massive opportunity presented by China is bound to attract investors.
(ET)
