Chinese investment banks scout for early-stage deals in India

India startup ecosystem has been attracting capital from Chineses venture capital (VC) firms and strategic investors. While they put in close to $5.6 billion in till 2018, now Chinese tech-focused merchant banks are jumping into an early-stage investment opportunity in the country.

Chinese investment banks including Fusion Capital, Fanzhou Capital and Index Capital are looking for early-stage ventures, startups who are not more than three years old and have bagged series A round.

These investment banks, are as per ET report, have held discussions with several early-stage startups, including lifestyle community startup Trell, Leverage Edu, Krediy and PerkFinance.

Though, there is no report on confirmation of investment in startups as mentioned above as the conversation are ongoing.

The strategy for the newer investment banks is to support early-stage ventures and build relationships.

Fosun International arm Fosun RZ Capital has already invested in PerkFinance and Kredily. Whereas Trell and LeverageEdu are backed by Sequoia Capital and Blume Ventures, respectively.

Meanwhile, startups hailed these investment bankers deep understanding of the market. "They can tell you what has been the historical performance of your peers in the Chinese market, which helps us immensely, given the scale at which a lot of them operate,” Prashant Sachan, chief executive of Trell, told ET.

Besides, Indian entrepreneurs find conversation with Chinese investment bankers much more helpful and enlightening. Initially, these investors charge premium from early-stage startups, but after the startup scales up, the premium goes down.

This year Chinese investors have mainly been investing in fintech companies and B2B. GGV Capital and Tencent invested in Udaan's $586 million round while they also participated in KhataBook's Series A financing round.

Hillhouse also participated in the Udaan's Series D round.

Chinese VC investments in India has witnessed significant upsurge. From $3 billion venture capital in 2017, it reached close $6 billion in 2018, according to a report by startup data tracker - Tracxn.

Hangzhou-based Fusion Capital, which is also planning to launch an early-stage fund in India, claims 33% of its deal flows from India. As per founding partner Maosen Li, the firm has partnered with local venture capital firms and boutique investments.