SUMMARY
Chinese VC investments, surpassed investments coming into India from the US and Japan in 2018
Infrastructure is weaker than China’s, but the opportunity is bigger in India, Chinese VCs say
"Easier to convince an investor to come on board if they are comfortable with you as a person," Jeffrey Yam of Integrated Capital says
In 2018 Chinese investments into India rose to $5 Bn. Despite geopolitical tensions between the two countries. Chinese VC investments, surpassed investments coming into the country from the US and Japan.
Among the top Chinese investors were Alibaba, Shunwei Capital, Fosun Tencent and Xiaomi. Sectors such as consumers, food-tech, logistics, retail, artificial intelligence, Internet of Things and fintech attracted maximum investments.
The TiE Global Summit brought together heads of Chinese investment and tech firms which are now actively participating in the Indian Startup Ecosystem. Prominently, Benny Chen, the managing partner of BAce Capital, a $100 Mn venture capital fund, which is anchored by Ant Financial, the payments affiliate of Alibaba, Shirley Mao, the head of Xiaomi’s strategic investment department, Damien Zhang, vice president of CDH Capital and Jefferey Yam, of Integrated Capital.
What Is Different Between India And China
“While the traditional infrastructure is weaker than China’s 15-20 years ago, but the opportunity is bigger in India. However to solve those problems we have to take a very different approach than what we did in China,” Chen of BAce Capital said.
India is a very fragmented market, so to increase penetration, we have to do a lot of heavy lifting in terms of creating support systems and basic infrastructure, he added. The sentiment was echoed by most of the Chinese delegates at the event.
Because the market maturity is different, there are differences in which models work in better India as compared to China, Shirley Mao said, giving the example of Oyo’s business model, which has created a lot of value in India by simply increasing efficiency. In China a lot of efficiency is already built in so the difference would not be much.
Another differentiator between India and China is that India’s fragmented market will ensure that there is no one large player occupying all the sectors like in China. Both ecommerce and payments markets are more fragmented in India so there are a lot of opportunities in this country, Mao added.
Chinese VC Culture
On a lighter note, in a panel discussion called “Chinese Investor’s Expectations From India” Damien Zhang from CDH Investments and Jeffrey Yam from Integrated Capital broke down the cultural gaps between Chinese and Indian startup ecosystems.
Damien said that a big difference is the amount of interaction between founders and investors in China compared to India. In China founders do not talk to the venture capital funds about their strategies. “So when I first came to India, I was very surprised when founders would schedule discussions every month!” Damien said.
“Today in China there is a lot of capital so fundraising is not an issue. But be transparent about your numbers,” Zhang said that a lot of infrastructure challenges both digital and physical slow the pace of founders in India.
Because the ecosystem in India is young and entrepreneurs are young so it takes a little while for investors to understand them and back them whereas in China and the US, there are a lot of serial entrepreneurs, Yam said.
“We are casual about meeting founders, so feel free to meet for drinks. And reach out for karaoke if you’re in China,” Damien said, “Ultimately it is a relationship-driven business and founders and investors need to like each other to work alongside each other, he added.
Private equity and venture firms in China and Hong Kong are picking up the slack in funding such ventures in the Asean region at a time when a trade war has dented China’s economic growth to the slowest on record last quarter and opportunities in consumer internet shrink in the country.
