Will The Absence Of Chinese Funding Cripple The Indian Startup Ecosystem?

Must Read

Net Worth Of Jeff Bezos Is More Than Combined Net Worth of India’s Top 10 Richest People!

Jeff Bezos and the phrase 'World's Richest Person' has become synonym to each other. But after the...

Search Engine Optimization In Digital Era: Look Beyond Traffic

Search engine optimization, aka SEO, plays a vital role in today's online world, especially if it's about...

The Sudden Rise In The Demand Of Refurbished Smartphones In India!

The new normal is changing the dynamics of the Indian smartphone industry. In the last two to...

The Indian startup ecosystem, amid the growing tensions between India and China’s relationship from the past few months, is now in rocky waters when it comes to raising capital. Needless to say, top startups of the nation such as Paytm, Zomato, BigBasket, Flipkart, and many more had previously relied on raising capital from Chinese investors to boost their growth. Now, with that option being thrown out of the equation, the future of fundraising in the startup ecosystem in India is being heavily questioned by industry leaders and analysts.

Currently, entrepreneurs and companies in India are choosing not to openly discuss this issue, however, it is quite obvious that the fear of running dry of capital has settled into the ecosystem.

Chinese investors happened to emerge as the biggest backers of India’s fast-growing digital economy by pumping a whopping $3.9 billion in Indian companies in 2019 alone. Now, in 2020, this particular relationship took its first big hit when India issued the Press Note 3 back in the month of April. It immediately changed the FDI aka Foreign Direct Policy of the nation by putting a barrier to all forms of investments from countries sharing a land border with a mandatory prior approval process.

Advertisements

This particular news, while definitely hurting the sentiments of China, sent shockwaves in the Indian startup ecosystem as well. It was a complete no brainer that many companies, mainly in early and growth-stage and not in late-stage bets, would be severely affected by this decision.

A founder of a unicorn, under the condition of anonymity, stated how his company has become too big to fail even though it is majorly funded by Chinese investors. He continued by saying that, it is, however, not going to be the case for early and growth-stage companies as well because for them investments from Chinese backers are still an option-value.

It wouldn’t be surprising if China, after all the events that have transpired such as the sudden change in India’s FDI policy, growing sentiments regarding boycotting Chinese goods from the nation along with the tensions at the border, chooses to allocate most of their capital outside of India. This is something that is not necessarily a good thing for the Indian startup ecosystem as it is still heavily reliant on foreign funding to grow amid the absence of home-grown pools of capital. China walking away from the table will lead to many Indian startup companies face significant near-to-medium term cash constraints for sure.

New Opportunities Sprouting Up For The Indian Startup Ecosystem

While Chinese funds might no longer flow into Indian startups as freely as it did before, it doesn’t mean the country’s entire startup ecosystem will be left absolutely crippled. Many startup entrepreneurs and industry analysts have stated that new avenues are opening up from countries such as the UK, the US, and the Middle East after the notification of the government’s Press Note 3 in April. Also, one shouldn’t forget to consider Japan as in 2019 alone, they have invested close to $10 billion in 105 Indian startups and 12 unicorns across more than 136 funding deals.

Another significant reason why it’s okay for Chinese funding to slowly start departing from India is because of the fact that it always comes with ‘riders’. A founder, under the condition of anonymity, mentioned how he happened to receive a small cheque from a Chinese fund but it happens to also count as ten diversified investors. Thus, funding from Chinas is not preferred beyond a certain limit in reputable and large companies according to many entrepreneurs and VCs.

Advertisements

Now, it remains to be seen what does the future of raising capital for Indian companies hold as Chinese capital is expected to remain a not-so-wise choice for at least in the medium term while anti-Chinese sentiments in the country are high. We will keep you posted on all future developments. Until then, stay tuned.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Latest News

Global 5G Chipset Market: $22.41 Billion By 2026, Driven by 5G Smartphones

As the world has started shifting from 4G to 5G era, the global 5G chipset market has...

Launch Of JioMeet Will Make Zoom To Be The 60th Chinese App To Get Banned In India?

Today as soon as the launch of JioMeet was formally announced by Mukesh Ambani, the frontman of Reliance Industries, people quickly found...

Intel Invest in Jio Platforms: A Chance For Redemption In The Smartphone Market?

If you thought Mukesh Ambani was finally going to stop the stake selling spree in Jio Platforms after RIL was recently announced...

With The Launch of JioMeet Reliance Sets Its Eyes On Video Conferencing Market!

The race to dominate the video conferencing market has just become more interesting. As we are going through the...

Facebook To Shutdown Lasso, The TikTok Competitor: A Well Calculated Move?

By now almost everyone is aware of how Facebook Inc. (NASDAQ:FB) always attempts to copy every other popular app that tries to...

Net Worth Of Jeff Bezos Is More Than Combined Net Worth of India’s Top 10 Richest People!

Jeff Bezos and the phrase 'World's Richest Person' has become synonym to each other. But after the latest jump in the net...

In-Depth: Dprime

Will The Online Food Delivery Market in India End Up Becoming A Two-Horse Race?

It's pretty much evident that the food delivery space in India is all set to get riled up soon enough as one...

Fantastic 4: Four Day Work Week A Flashpoint Of Innovation?

It has been an idea that has been mooted by many, perhaps also somewhat sceptically. From being a dark horse to becoming...

TikTok Is Facing The Wrath Of People Who Love It The Most

Ever since the popular social media app TikTok entered India, it has been growing very aggressively in terms of users. Within a...

More Articles Like This