The last few months have seen marquee investors, including Temasek Holdings, Tiger Global Management, DST Global, Bond Capital and Silver Lake Partners, pouring money into large Indian startups
Bengaluru/Mumbai: As Chinese investors pull the brakes on investing in Indian startups, investors from US, Europe and Singapore are filling the gap by placing fresh bets on unicorns.
In the last few months, veteran investors like Singapore’s Temasek Holdings, New York-based hedge fund Tiger Global Management and others like DST Global, Bond and Silver Lake have stepped up investments in startups.
China’s tech giant Alibaba Group is unlikely to sign fresh deals in Indian firms in the coming months amid higher scrutiny, Mint reported on 27 August. Other Chinese investors too stalled new funding after changes in foreign direct investment (FDI) rules that made prior government approval mandatory for investments from countries that share a land border with India.
With the new investments coming in, large Chinese investors may gradually reduce stake and exit large startups after aggressively investing in recent years, given the uncertainty ahead.
Foodtech unicorn Zomato has recently raised close to $165 million from MacRitchie Investments, a unit of Temasek and Tiger Global. Temasek is also in talks to invest in online grocery firm BigBasket, which could raise around $300-350 million from a clutch of investors, according to two people familiar with the deal.
Ravi Lambah, joint head, investment Group; head, direct investments; joint head, telecom, media & technology; head, India, Temasek said it is looking at businesses in the consumption space, as well as in tech and fintech.
“One of the long-term trends that we are interested in is digitization or a connected world. As economies digitize, companies get more connected, there is a big opportunity to have services that are smarter. We saw e-commerce do so well in covid-19, as it was the only way to deliver products or food to customers, even though their delivery and supply chain costs went up. And this is a consequence of the digital world," Lambah said in a recent interview.
BigBasket and Temasek didn’t respond to funding queries.
"Alibaba has always been an active investor in BigBasket and Zomato, in all the rounds since their first investment. Even though this is the first BigBasket funding round without an Alibaba participation, it doesn't mean that the latter’s absence will hurt valuation or pricing. It only means that BB and Zomato will now have to scout for investments from large PE or sovereign funds since its now a late-stage startup," said a person familiar with the development, asking not to be named. "Both Mirae Asset and CDC will surely put in at least $40 million each in the current round."
Earlier this year, BigBasket raised $150 million from South Korea’s Mirae Asset Management, UK’s CDC Group and existing investor Alibaba, putting the startup in the unicorn club.
Ankur Pahwa, e-commerce and consumer Internet leader, EY said with newer investors coming in, the dependence on Chinese investors would reduce and lead to a diversification of investments in the startup ecosystem.
“There is huge interest from large investors both in India and from overseas. Chinese investors contributed a lot of understanding in terms of market insights and learnings in recent years given the similar market dynamics which China has been through already. But newer investors who are funding now is great for startups and lending much-needed diversity," Pahwa said.
Edtech startup Byju’s, which has raised over a billion dollars this year, is a classic example of a unicorn raising capital from a wide base of global investors. After raising funds from Mary Meeker’s fund Bond and DST Global, it recently raised $500 million led by US-based Silver Lake, existing investors Tiger Global, General Atlantic and other new investors BlackRock, Sands Capital and Alkeon Capital at a valuation of $11.1 billion.
Ankur Bisen, senior vice-president, retail and consumer at management consultancy Technopak said not all unicorns can be put in the same bucket and need to be evaluated individually.
“Investors are evaluating unicorns based on the scope for further growth, the stamina to stand on their own and the road to profitability. Companies like BigBasket and Byju’s have demonstrated that. The growth of BigBasket despite e-commerce majors like Flipkart and Amazon is phenomenal. They stuck their business model, built supply chain and have maximum market share in online grocery. Similarly, Byju’s is in an emerging sector with lot of headroom to grow," Bisen added.
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