2018 In Review: International Investors That Debuted In India

This article is part of Inc42’s special year-end series — 2018 In Review — in which we will refresh your memory on the major developments in the Indian startup ecosystem and their impact on various stakeholders — from entrepreneurs to investors. Find more stories from this series here.

The year in passing — 2018 — was a monumental year for the Indian startup industry. Flipkart got acquired by Walmart in a massive $16 Bn deal, resulting in big, fat exits for many investors. The lack of exits has been the bane of investors in the Indian startup ecosystem. Therefore, the landmark deal went a long way in infusing confidence among investors and provided much-needed validation of the maturing growth story of Indian startups.

But silently and behind the scenes, something else was happening in 2018. It was the year that saw a huge uptick in dealmaking by China-based funds, mixed together with some Japanese ones as well.

Data from research firm Venture Intelligence shows that investors from China and Japan were involved in a higher number of deals in 2018 than in the last seven years, with the total deal count for the year standing at 77, with an aggregate value of $3.6 Bn.

Among these, Japanese MNC holding conglomerate Softbank, led by Masayoshi Son, is leading the charge. Softbank is the largest player, having executed a total of 25 deals in the country worth about $8.6 Bn and added notable startups like Paytm, Ola, OYO, and PolicyBazaar to its kitty.

 

 

These findings are part of Inc42’s initiative of identifying and creating a list of all the top international investors that entered India for the first time in 2018.

In this article, we have listed the top new international investors that funded the Indian startup ecosystem in the year gone by. The list is a product of our ongoing conversations with some of the top industry voices, research companies such as Venture intelligence and Prequin, and our own reportage, which is the central input deployed in this effort.

So here goes — the list of top foreign investors who entered India in 2018:

Industrial and Commercial Bank of China: Investing In SMBs

The Industrial and Commercial Bank of China (ICBC) is China’s largest bank. It has trained its eyes on the Indian market with a $200 Mn fund, which it will be investing in India’s local startups and small- and medium-sized enterprises (SMEs).

The ICBC, which plans to make investments in India via a local subsidiary, will leverage its international experience and huge cash reserves to explore India’s growing fintech industry and the SME segment, which contributes more than 40% to India’s exports.

But the bank also found itself in a bit of a controversy in July after the Reserve Bank of India (RBI) issued a licence to the Bank of China to launch operations in India and the Ministry of Home Affairs (MHA) raised objections to a proposal by the ICBC to open a second branch in India.

The MHA reportedly voiced concern that the ICBC had employed more than the authorised number of Chinese nationals at its Mumbai branch. The bank, in its defence, said that since most people in China do not speak English and Indians don’t speak Chinese, more expats should be allowed.

In FY 17, the ICBC recorded a whopping $159.2 Bn in revenue. It counts Singapore-based investor Temasek Holdings, which has already invested billions of dollars in India, as one of its top shareholders.

Morningside Venture Capital: Exploring New Horizons

Morningside Venture Capital is one of China’s oldest early-stage venture investors with around $1.7 Bn under management. It made its debut in India this year with investments in Dreamplug Technologies (November), Sharechat (September), and Cashify (June).

Dreamplug Technologies is owned by Freecharge cofounder Kunal Shah and owns and operates his new fintech venture, Cred, a platform that awards users for timely payments of their credit card bills. Kunal Shah raised $25 Mn in funding for Cred, with Sequoia Capital and Ribbit Capital leading the financing round and Morningside Venture also participating in the round.

Morningside, which was an early backer of Chinese smartphone maker Xiaomi ($41 Mn in Series A, while the second round totalled $90 Mn in Series B), also invested in Bengaluru-based vernacular social platform Sharechat in September. Sharechat raised $100 Mn in the fresh round of funding, which was reportedly one of the most hotly contested rounds of venture funding in India this year.

The fund has previously invested in sectors such as health, ecommerce, and enterprise solutions.

Morningside also coinvested in online Gurugram-based used-phone seller Cashify in a $12 Mn Series C round led by Chinese private equity firm CDH Investments along with strategic investor AiHouShou.

Composite Capital Management: Putting Its Chips On Fintech

Hong Kong-based investment firm Composite Capital Management was launched by David Ma in 2016. Prior to this, Ma spent seven years as a partner at Hillhouse Capital Group, a China-focused fund that manages over $20 Bn in Asia. Composite Capital invests in consumer, technology and transportation startups all over the world.

Composite Capital made its first investment in India in Cleartax.in in October. Cleartax raised $50 Mn in a Series B round of funding led by Composite Capital, with participation from existing investors like Sequoia Capital and SAIF Partners.

Bengaluru-based Cleartax.in is an online tax return-filing and investment platform and is expected to have processed around 4 Mn tax filings through its platform in fiscal 2018, against about 2.5 Mn in the previous year. The company also expects 5 lakh corporate entities to use its services in 2018-19.

 Till date, the fund has made a total of five investments, including in Beijing, China-based TuSimple, which specialises in developing machine vision-focused autonomous driving solutions; Zoox, a US-based robotics company pioneering autonomous mobility; Teckst, a New York-based customer services company; and Chalk Digital, a San Diego, California-based mobile ad platform.

RDGlocal: Putting Stock In Social Media, Content

RDGlocal, a fund led by former top executives of Chinese internet giant Alibaba, plans to invest $100 Mn in the Indian social media and content space over the next two years.

The fund’s first investment in India was Welike, a Gurugram-based social media platform which offers content, including video, audio and pictures, in seven Indian languages. Welike claims to be India’s first social media app and has a self-proclaimed goal of “providing a platform for people to become famous.”

RDGlocal plans to make investments across sub-verticals including both short and long form video content. It will also engage with content producers, influencers, key opinion leaders, content brands, news media, etc.

The chairman of RDGlocal, Yongfu Yu, has been a key leader in the Alibaba ecosystem for the last several years, leading multiple businesses, including Autonavi, a mapping and navigation company; Alimama, which is Alibaba Group’s digital marketing platform, and Alibaba Entertainment Group, a film company.

The fund wants to position itself as a bridge for ambitious Indian entrepreneurs who want to access the Chinese startup ecosystem and stakeholders, so that they can utilise cross-border resources and market synergies.

RDGlocal has offices in Beijing, Delhi, Hong Kong, Seattle, and Guangzhou.

 

 

 Sailing Capital: Riding The India Wave

Sailing Capital is a Hong Kong-based private equity fund founded in 2012. It marked its entry into India when it co-invested $50 Mn in India’s homegrown blockbuster cab aggregator Ola in September.

The funding round valued Bengaluru-based Ola between $3.7 Bn-$4.3 Bn. Sailing Capital and the China-Eurasia Economic Cooperation Fund (CEECF), a Chinese state-backed investment fund, took a combined stake of more than 1% in Ola.

Meanwhile, Ola cofounder Bhavish Aggarwal is seeking a lower amount in funding from SoftBank so as to stop the Japanese conglomerate from increasing its current stake of 26%, but that’s another story for another time.

Sailing Capital mainly focuses on overseas investments and one of its most notable investments has been Mobileye, a leading player globally when it comes to autonomous driving technology. Sailing exited its investment after chipmaker Intel bought Mobileye for $15.3 Bn in 2016, making it the biggest-ever acquisition of an Israeli tech company.

Sailing Capital, which specialises in targeting overseas investments, is also reportedly looking to to raise the equivalent of about $1.5 Bn for its second fund and will focus investments on consumer, health-care and technology investments.

Dentsu Ventures: Making A Dent In India

Dentsu Ventures is a Japanese corporate venture capital fund that made its first investment in India in Gurugram-based bus shuttle service provider Shuttl in July. The $11 Mn Series B funding round in Shuttl was led by Amazon, Amazon Alexa Fund, and Dentsu Ventures, along with other existing investors.

Shuttl, launched in 2015, is currently present in Pune, Mumbai, Hyderabad, Delhi NCR, Kolkata, and Jaipur. Prior to the Series B, the startup had already caught the eye of some of the top investors and raised funds from the likes of Sequoia Capital, Times Internet, and Lightspeed Ventures.

The startup plans to target 50,000 rides a day with 600-700 buses on the platform. It claims to have completed more than 800,000 rides at an average of about 15,000 rides per day.

Dentsu Ventures, headquartered in Tokyo, Japan, claims to be “a hands on” corporate venture capital fund that specialises in seed, early stage, mid-stage, and later-stage investments across wide range of sectors.

Berkshire Hathaway: Opening Its India Account With Paytm

One of the biggest name in the investment world — Warren Buffet’s Berkshire Hathaway — finally made its entry into India by investing $300 Mn in One97 Communications Ltd, the parent of mobile payments platform Paytm in August.

As part of the deal, the US-based Berkshire was to acquire 1.7 Mn shares of One97 Communications for $176.18 per share, gaining a 2.9% stake in the Indian payments giant. Berkshire Hathaway joins Ant Financial, SoftBank, Alibaba, and SAIF Partners as key shareholders in Paytm, adding to its distinguished list of investors.

Berkshire’s investment comes at time when the Indian digital payments industry is expected to reach $700 Bn by 2022 in terms of value of transactions, according to Reuters.

In July, Paytm had said that the Noida-based company had hit an annual run rate of 5 Bn transactions and registered $50 Bn gross transaction value (GTV) in a year, apart from achieving 500% growth in money transfer transactions in the last quarter.

Berkshire’s first ever partnership in India, which did not involve any transfer of equity, was with Bajaj Allianz in 2011. Berkshire was selling insurance from Bajaj Allianz online. But with laws restricting foreign ownership, the partnership soon ended.

Hopefully, Paytm is just the start and Berkshire will continue to scout for investments in the coming year.   

Mithril Capital Management: 50 Shades Of Startups

Mithril Capital is a private venture investment firm which made its first bet in India by leading a $140 Mn funding round in GreyOrange, a Mumbai-based warehousing automation and robotics startup, in September.

Mithril’s investment committee is chaired by co-founder and billionaire VC Peter Thiel, who cofounded US-based payments giant PayPal and led it as CEO, taking the company public in 2002. Thiel was also an early investor in Facebook.

Founded in 2011 by Akash Gupta and Samay Kohli, GreyOrange designs, manufactures, and deploys artificial intelligence (AI)-based robotic systems that can automate routine tasks at warehouses and fulfilment centres of large ecommerce and retail firms.

GreyOrange handles warehousing for companies such as Flipkart, Jabong, Myntra, and PepperFry. The startup is counting on the continuous upswing of ecommerce services in India (it is expected that 41.6% of India’s population will be digital shoppers by 2022) for its next phase of growth.

Mithril Capital has previously invested in healthcare, ecommerce and internet software/services companies.

Northpond Ventures: A Shot In The Arm For Healthtech

Northpond Ventures is a US-based, “science-driven” venture capital firm. It led a $40 Mn (about INR 270 Cr) in a Series C funding round in Bengaluru-based oncology solutions company Mitra Biotech in July.

Mitra’s diagnostic platform CANscript recreates a patient’s tumour microenvironment and applies its proprietary multi-parameter evaluation technology to help doctors make more informed decisions on how to treat the cancer and discover effective drug combinations best suited for the particular patient.

Northpond Ventures, which was founded in 2018, has made a total of five investments in the US, which include companies engaged in healthtech, microbiology and biotech like General Automation Lab Technologies, Nanoview Biosciences, Inflammatix, Intabio, and IsoPlexis.

Mitra, which has so far raised $76 Mn in funding, is Northpond’s biggest investment.

Think Investments: Investments In The Pink Of Health

Think Investments, a US-based private investment firm, took its first plunge in India by participating as a lead in the $50 Mn Series C round of funding in Mumbai-based healthtech startup PharmEasy in September.

Think Investments is a hedge fund that was founded in 2013 and is based in San Francisco, California. It claims to especially focus on seed-stage enterprise application software companies.

PharmEasy was founded in 2015 by Dharmil Sheth and Dhaval Shah, who’s a doctor. The startup caters to the chronic care segment and offers a range of services such as teleconsultation, medicine delivery, and sample collection for diagnostic tests. It also has a subscription-based service, which is currently live in a few cities.

Currently, medicine sales still bring the maximum share of revenue (up to 80%) for Pharmeasy, while the other services it offers, such as tele-consultation, home diagnostic tests and a subscription-based service, make up the rest.

After the $50 Mn fundraise, the startup has started scouting for acquisitions in different verticals such as diagnostics, doctor consultations, and others.

Insight Venture Partners: Charging Ahead

Insight Venture Partners is a global venture capital firm based in the US that made its maiden investment in India in Chargebee, a SaaS subscription management company based out of Chennai, in March.

Chargebee, a smart subscription billing platform founded in 2011, raised $18 Mn Series C round led by Insight Venture Partners, with participation from existing investors Accel Partners and Tiger Global Management.

According to Krish Subramanian, CEO and co-founder of Chargebee “the company’s mission since inception has been to deliver enterprise-grade subscription billing capabilities to businesses of all sizes and help them scale with us.”

Insight Ventures, which is a tech-focussed fund, has raised more than $18 Bn in funds and invested in over 300 companies worldwide since its inception in 1995.

In 2013, Insight Venture Partners, which backed Tumblr ($85 Mn, 2011) and Twitter (undisclosed, 2009) in the past, raised $2.57 Bn in what was one of the largest raises for a venture fund ever. This gave it the ability to write cheques that are up to $300 Mn in size.

The Year Of The Hungry Dragon

The International Monetary Fund (IMF) forecasts that China’s GDP growth for 2018 to be 6.6%, the lowest since 2001 when China joined the World Trade Organization.

The thing about economies maturing is that their appetite for GDP growth increases. China today is an economic powerhouse and for it to sustain the almost rocket-like growth rate of yesteryears is becoming increasingly difficult.

 

 

But the country hasn’t lost its insatiable hunger for growth. To feed this hunger, China — along with other advanced economies like Japan and the US — is increasingly participating in startup funding rounds in India. And with India being a hotbed of new products, services, and platforms emerging to cater to millions of users who are coming online for the first time and millions who’re becoming digitally sophisticated, these bets are likely to only whet their appetite further.

China is currently India’s largest trading partner and for many years, Chinese companies got a lot of flak in India for flooding the Indian markets with China made goods that were outselling local products because of their lower pricing and value for money. What was not generally discussed was how good the Chinese companies were and their ability to scale almost anything.

 

Chinese companies such as Alibaba, which are actively investing in India, bring with them this experience of scaling digital products. The fusion of Chinese scaling capacity with Indian ingenuity and efficiency may create a unique ecosystem and set the stage for sprouting new business models.

But the ongoing debate about foreign investors and Indian ownership might also spill over into Chinese investments in Indian startups, especially given the geopolitical conflict that the two neighbours find themselves in from time to time.

As far as Indian startups and companies go, more Chinese money, controversy or no controversy, just means extra opportunities for startups to scale their products and services.

It’ll be interesting to see how this trend further takes shape in 2019.  

[Edited by Prakriti Singhania]