With the ban of 59 Chinese apps and the sudden outbreak of COVID-19, it has been observed that $166 million is invested in Indian startups from China during the period from January to July 2020 whereas the investment was around $197 million during the same period of the year in 2019 and in total $641 million was invested by China in Indian startups in whole 2019.
The reason behind the drop in investments by Chinese companies is followed by strict government laws of India about Foreign Direct investments needs permission from any country who shares borders with Indian Territory, that came into force from April which mainly restricted investments from China, in particular. The investment head of China also revealed that they will not show much interest in investing in Indian startups until there is any clarity from the Indian government.
“Chinese investors who had been looking at companies in the consumer internet space, as well as some elements of deep tech, wanted to close those deals as soon as possible,” explained Siddharth Pai, 3one4Capital founding partner. He also added that “After the Press Note 3 announcement was made, a number of these deals got put on the back burner because of the uncertainty generated by it,”
Some of the Chinese investors are still interested in ideas and proposal of Indian startups – “I don’t foresee their enthusiasm going away anytime in the future unless, of course, there are political considerations that come into the picture from either side,” said Siddharth.
It is not only from the side of Chinese investors that they have paused the investments from their side but also there are few Indian startup founders who are refusing to collect funds from Chinese investors. Varun Saxena, the founder of homegrown short-video app Bolo Indya, set an example by refusing to accept any investment from China and respect the rules and laws set up by our Indian Government.
Chinese investors had earlier played very important roles in some of the Indian origin startups. It played a big role in investing in Swiggy- online food delivery app.
American and European investors are also facing obstacles to invest in India and who had invested in India earlier as some as many of them have raised the amount of money from Chinese firms which is also becoming a hindrance in investments for Indian startups.