Chinese VC firms make a beeline for investments in Indian startups

The Chinese multi-national e-commerce conglomerate, Alibaba began its investment journey in India with Paytm in 2014.

A year later, the rival company Tencent followed suit and led a round of $90 million in Practo. This was also the first investment by the Chinese company in an Indian startup.

The Chinese investors have cautiously invested in Indian startups and the deal has been limited to a few.

However, there has been a sudden shift in the investment portfolio of the Chinese companies. In the past few months, Alibaba, Tencent, Xiaomi and Shunwei have invested multi-million dollars in India.

These are the multinational companies whose investments were celebrated in the startup community which the latter heralded as an opening of a new support system for the cash-crunched startups.

It appears that the community was right in its assessment as many new venture capital firms including Qiming Ventures, Morningside Ventures, CDH Investments, 01VC and Orchid Asia Group are looking to buy stakes in Indian startups, according to ET. They plan to spread investments across financial and education technology, e-commerce, content and online classifieds.

The report added that a large number of Chinese VC firms are majorly looking to lead series B and series C (investments) where a company has proven the business model, leads the vertical, and needs capital for faster growth.

CDH Investments and Morningside Ventures plan to begin with an investment of $14 million in Delhi-based online used phone seller Cashify along with existing investor Shunwei.

Experts believe the Chinese VC firms are gung-ho about India with the success of companies like Xiaomi in India.

Morningside Ventures is an early investor in Xiaomi and is expected to get 40-times return, once the company lists in the IPO. Last month, the Chinese phone maker filed for an initial public offering in Hong Kong that is expected to raise around $10 billion which could value the business as high as $100 billion.

Besides, the recent investments by Alibaba, Tencent, Shunwei, and Xiaomi have worked as faith strengthener in the startup ecosystem in the country.

In early this year, while Alibaba invested $200 million in Zomato, Tencent-backed Dianping along with Naspers (an early backer of Tencent) led a $100 million round in Swiggy.

Shunwei Capital has invested in six new companies in the past 15 months.

Xiaomi, which has already invested in companies like Hungama, Krazy Bee, and others, is planning to invest around $1 billion in 100 Indian startups over the next five years.

In the eyes of experts, India's start-up sector has been facing a funding crunch and Chinese money will come as a boon for new entrepreneurs.