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Hello there, this is Avanish from Bengaluru. Welcome to the 17th edition of our India Digest.

It has been five months since Indian startups haven't received any venture capital from China—one of the largest backers of India's booming tech sector— following the new foreign direct investment rule implemented by India in April. While a few established companies in select sectors such as edtech, e-health, short-video space, online grocery, and gaming have been able to raise money during the pandemic, scores of early-stage companies don't share the same fate.

In this week's big read we talk about how startups have coped in these five months with no investments from China, that too at a time when these companies need funding more than ever.
The Big Read
As Chinese funding dries up in India, local tech startups are looking elsewhere

What Happened

Chinese investors poured USD 3.9 billion into India in 2019, up from USD 2 billion in 2018, as India’s burgeoning Internet industry bears many similarities with China’s online sector. In addition to China’s internet giants like Alibaba and Tencent, venture capital funds like Shunwei Capital and Morningside Venture have also been actively investing in India’s developing tech ecosystem. Out of 30 unicorn companies, 18 are backed by China-based VC funds.

However, this year has been different. 

In April, following political tensions between the two countries, India put a roadblock in fundings coming from Chinese companies. India’s Ministry of Commerce rolled out a new policy to stop “opportunistic takeovers” requiring all foreign direct investment (FDI) from neighboring countries that share land-border with India to be approved by the government. Since then, there has been no direct investment from China in any Indian startup.

What Does it Mean

For Indian tech startups who have relied on Chinese investments in the past, the future looks uncertain as they look for alternative funding sources. While bigwigs like Zomato managed to raise USD 62 million from Temasek after it couldn't receive USD 50 million promised by Ant Financial, hundreds of early-stage companies have been struggling to survive during the pandemic.

However, the good news is that several local and global VC firms have recently raised India-focused funds for both growth stage and early-stage companies. Right from Sequoia Capital, Lightspeed India Partners, to Google and several Indian funds like 3One4 Capital and Mela Ventures have announced new funds to invest in the country.

The Weekly Buzz

1. Indian D2C e-tailer Hopscotch raises USD 25 million amid the slowdown. The Mumbai-based startup also counts, Eduardo Saverin, co-founder and the first investor of Facebook Inc., and Toivo Annus, CTO and co-founder of Skype, as its backers.

2. Zomato says food delivery industry in India has almost recovered. In a report, Gurugram-based food delivery giant Zomato said the food delivery industry has continued to steadily grow back to the pre-COVID-19 levels, with the overall sector reaching over 85% of pre-COVID-19 Gross Merchandise Value (GMV).

3. American private equity firm KKR invests USD 754 million in Reliance Retail. This is the second investment by KKR in Reliance. The American PE firm had invested USD 1.5 billion in Jio Platforms, Reliance’s digital arm, earlier in May.

4. India contemplates banning digital lending apps with links to China. After banning 177 Chinese apps since June including WeChat, PUBG, and TikTok, the Indian government moved to target fintech startups in the country that have connections with Chinese nationals or companies on grounds fearing they might collect sensitive customer data, a claim TikTok has denied before.

5. Google takes down Paytm and its gaming app Paytm First Games from Play Store for allegedly violating its betting and gambling policy. Paytm’s other apps such as Paytm Mall, Paytm Money and others are still available on Play Store.

6. Samsung and OnePlus gear up for a fight as competition intensifies in India’s premium smartphone segment. According to the recent numbers published by Counterpoint, OnePlus became the top smartphone brand in the mid-to-high end category (devices priced over USD 400 or INR 30,000) with a 29% share in the quarter ended June 2020.

Features of the Week

1. Dozee detects early signs of deteriorating health. Mudit Dandwate and Gaurav Parchani first started to work on a prototype that could track a person's sleep pattern. However, over the months during their R&D process, the sensor quality of the device got so better that it could track a person's whole body vitals by reading heart beat and other micro movements. The device is used by both hospitals and individuals.

    2. How Indian bus ticketing platform redBus cracked Southeast Asia market. As the undisputed leader in the bus booking category in India, redBus began its global expansion in 2015. After opening its service in Singapore and Malaysia, it quickly entered Indonesia in 2016, a bigger market for the bus booking category. The same year, it acquired a Latin American bus portal to get access to Peru and Colombia markets.


    Internet user base in India rose to

    743 million

    at March-end

    Deals This Week

    In partnership with data tracker Tracxn


    Tejeshwi Sharma is partner at Sequoia India

    Sahil Lavingia is founder of Gumroad
    Paras Chopra is founder of Wingify

    What We Are Reading

    Why Indian Languages Failed to make a mark Online!

    Although an article from ten years ago, it still resonates—if not even more—in the current times when almost all digital platforms are trying to create a local language-based solution. This piece gives deep insights into the challenges Indian technology entrepreneurs face while working on implementing local languages. And that question raised in the piece a decade ago, still rings harsh yet true today: Even if they were to adopt Indic languages – the question will always be – which one to start with?

    The Spoiler

    Tune in next week as we take a closer look at Mukesh Ambani's Reliance Retail and its numerous attempts to create an omni-channel retail empire, as it started a fund raising spree like Jio Platforms.

    KrASIA launches a new membership program to encourage community initiatives across Asia

    Sign up
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