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Over the past few years, Indian startups have experienced a staggering growth with companies like Ola now valued at $6.2 billion, which makes us ponder about how some startups raise massive amounts of money. Indian companies receive a bulk of their capital from abroad with over $5.6 billion dollars flowing into Indian startups in 2018 courtesy of Chinese venture capitalists.

Let’s explore the different aspects of such investments.


FinTech and E-Commerce sectors account for a handsome 50% of the aggregate money pumped in Indian startups from 2014-18. The Fintech industry poses grave risks regarding misuse of data by foreign intelligence organisations since the use of services by companies like Paytm, Cleartax is used without distinction by an ordinary person as well as an official of the Defence Ministry. Investments by Chinese firms into sectors like Agrotech may allow them to hold leverage against India in times of hostility. Understanding the gravity of the situation, the US expanded CFIU’s (The Committee on Foreign Investment in the United States) powers in 2018 authorizing them to not only review takeover deals by foreign companies but also non-controlling investments in US Companies dealing in critical and upcoming technologies. As far as the Indian scenario is concerned, Alibaba is the largest stakeholder (38%) in One97 Communications, the parent company of Paytm, which goes to show the possibility of this data being accessed by the Chinese government due to the Statist nature of the Chinese economy. Further, excess capital infusion in startups can also have counter effects on the entire economy as it may lead to deep discounting which raises the possibility of a price war.


Commenting that the investments by companies like Alibaba have given a boost to the Indian Startup culture would be an understatement to the impact they have had on the Indian Economy. Today Paytm, Ola, Swiggy and Zomato together account for over 46,500 jobs and have an aggregate revenue of 6,500 crores which goes to show the extent of positive impact they’ve had on the ability of startups to scale up their operations. The assistance and expertise possessed by them through the experience of operating in a technologically advanced market like China are proving to be a shot in the arm for these startups, aiding them to face competition and escalate efficiency. When it comes to data misuse by the firms, such a possibility is very low since some major firms’ own stake lies with Japanese and US firms. Alibaba, a Chinese multinational conglomerate having close ties with the Chinese government, has about 40% of its stake held by foreign companies.


While the threat posed by Chinese investments to the nations’ bargaining power and security is a serious cause of concern, the question arises whether it outmatches their towering impact on the rise in the entrepreneurial spirit. the answer is a very simple “No”. Ever since India became a target for Chinese venture capitalists, the number of startups has spiralled with over 7,000 currently operating in Delhi NCR itself, facilitating the success of government programmes like Startup India. Limiting foreign investment in a capital-inadequate country like India would starve Indian entrepreneurs of finance which would drive us away from the already near-impossible goal of attaining a $5 trillion economy by 2025. However, the government cannot afford to be a mere spectator in matters concerned with the nation’s security; it must not ignore the regulatory aspects in its bid to make India an attractive option for global investors. While easing FDI norms in various sectors is an excellent step, the government should begin to direct its focus on strengthening data protection and privacy norms to ensure that customer data is not passed on to the Chinese Government while adopting a strict watch on the market to ensure that any particular company in a sensitive sector doesn’t gain leverage which could be in some way used against the country in times of discord.

It has been rightly said, ”What one has can be better leveraged by another”. This is the type of relationship between Indian startups and Chinese venture capitalists and it is the need of the hour to successfully harness this to fuel India’s growth.


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