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Saturday, March 25, 2023

Indian startups clock record VC inflow amid tech crackdown in China

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New businesses in India are mopping up a record inflow of venture capital this year. These startups will benefit even more as foreign investment shifts from China amid that county’s tech crackdown.

Startups in India’s technology sector,  which have seen record inflows of venture capital this year, will benefit even more. This is because global capital is moving away from tech firms in China that are facing a crackdown from that country’s regulators.

That’s according to multiple founders and investors, who say the Xi Jinping administration’s persistent attack on Big Tech businesses,  might lead to long-term changes in how huge internet companies are regulated globally.

India’s education startup, Eruditus, had its valuation quadruple to $3.2 billion after collecting $650 million from SoftBank, Accel US, and others earlier this month.

Eruditus’s co-founder, Ashwin Damera, said, more venture capital is invested in China as compared to India. “Now, if China’s funnel is being choked, it’ll move to a different country and with such a lot liquidity, emerging markets like India will receive that allocation.”.

At a time when the industry is experiencing greater liquidity, India is the third largest startup market for investors to park their capital after the United States and China.

According to data from industry tracker Venture Intelligence, the country has already seen 25 new unicorns (startups valued at more than $1 billion) this year, and approximately $20.76 billion has been raised in 583 deals as of August 20. In comparison, in 2020, $11.1 billion was invested in Indian startups, was 12 firms became unicorns.

Since the beginning of the pandemic, investors from small communities have been rushing in droves to internet brokerages and cryptocurrency platforms.

According to Hans Tung of GGV Capital, a Silicon Valley-based venture firm that has backed startups such as Udaan, Vedantu, and Rupeek, there is no doubt that the US and China are the world’s largest tech markets, but increasingly people are paying attention to India and believe that it would take the right lessons from China to grow faster while also providing opportunities for innovations.

Tung said that whenever there is uncertainty, it is both a fascinating opportunity to be a part of it and to look at what is happening worldwide.

Over half a trillion dollars have been wiped away from Chinese tech stocks in a week, including Alibaba Group, Kuaishou Technology, and Tencent Holdings, as a result of the ongoing China tech crackdown.

Last week, the Chinese government enacted tighter data protection laws that regulate how internet businesses handle user data, alarming investors.

The tight regulatory control was heightened last month when China, in an unexpected move, prohibited private involvement in the $100 billion education sector by announcing that platforms teaching school topics could not accept foreign capital.

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