Indian Startups Look East for Financing

Asia's economic growth has given more options for Indian startups looking for finance rather than the usual private equity from the West.

Economic Times reports that when Nasdaq-listed MakeMyTrip, one of Indian Internet first success stories, was looking to build a war chest recently, several events were playing out in parallel. Rival online travel agency Goibibo, backed by the deep-pocketed South African media group Naspers, were discounting heavily and budget hotels aggregator Oyo Rooms was on the verge of overtaking the 16-year-old company's valuation. 

MakeMyTrip did something unconventional: It looked eastward to its larger peer in  China instead of hitting up  private equity funds in the West. Last month, the company announced a $180-million ( Rs 1223.1 cr) investment from China's largest online travel firm Ctrip. "We believe MakeMyTrip and Ctrip can help each other to remain leaders in our respective markets by sharing wisdom and perhaps a few battle scars as well-earned along the way," 

MakeMyTrip's CEO Deep Kalra said on an analyst call on January 29. Given that MakeMyTrip is valued at about $645 million and Ctrip at $15 billion, it is clear who will be the bigger brother in this relationship. Abhishek Bansal, founder of hyper-local logistics startup Shadowfax, was in China for a week in November to meet investors and understand how the online-to-offline market had evolved there. "Chinese investors have seen market trends and potential in O2O, so the confidence they show about it is much different as compared to  Silicon Valley," said Bansal, 26, who previously worked in China as a consultant for about a year. 

Both decisions underline the increasing importance of Chinese companies and the Yuan—even if it's depreciating— to the Indian Internet and technology ecosystem, which until now has been dominated by American dollars. (1 yuan is Rs 10.4) In a new-age revival of sorts of ancient trade relations between the two neighbours, Chinese Internet giants Baidu, Alibaba and Tencent—collectively known as BAT—have been aggressively scouting in India the past year for startups to invest in. 

Tencent and Alibaba have started investing, and Baidu is searching for deals. On the surface, a theme of Indo-China brotherhood is playing out across India's largest Internet segments: Online retail (Foxconn and Alibaba Group have invested in Snapdeal), cab-hailing (Ola is a partner in Didi Kuaidi's global efforts targeting Uber) and digital wallet (Alipay has invested in Paytm). 

The underlying theme, though, is more likely that of India being employed as a battleground for Chinese and American Internet companies, according to some industry experts. "It's good that the Chinese are here. We see them as potential future acquirers of our portfolio companies," said TC Meenakshisundaram, managing director at IDG Ventures India, which has an affiliate in China.


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