MNCs And Foreign Ultra HNIs Eye Indian Start-ups

Corporates and ultra HNIs in the international market are increasingly scouting for attractive opportunities in the country, signalling a strong faith in India’s startup ecosystem. Russian billionaire Yuri Milner recently acquired a small stake in Practo, a rapidly expanding healthcare startup. He has invested in his personal capacity as well as through his fund, DST Global. Sheng Fu, who founded the $300-million Cheetah Mobile, a mobile security company, recently met with entrepreneurs at 10 startups in Bangalore, and is in the process of investing in a couple of them. He said, “The engineering talent cannot be ignored in India, and their ideas are creating a smartphone ecosystem globally.” The Chinese company is also looking for opportunities in mid-sized IT companies. The latest in line is Baidu, China's biggest internet search company, which has initiated talks to make its first investment in the country. Even as many investments is the startup ecosystem is gradually coming under scanner with industry experts raising questions on the sustainability of their business models, so far a few success stories are prompting foreign investors to take exposure in the sector. Chinese e-commerce giant Alibaba has acquired a 25 per cent stake for $575 million, making it India’s largest payments company by valuation. A decade ago, a small-time investor almost bought out Paytm for a low valuation. “Back then, India had no startup ecosystem, and I had no idea about these valuations. I was almost fleeced,” says Sharma. He now mentors entrepreneurs and prepares them for the future. “Indian entrepreneurs need our support,” he says. “I guide startups to build organisations around the core idea of their business.” Boom or Bubble?There are too many startups mushrooming in the country and in many cases it is the ‘copycats’ who are chasing the money-making opportunities and are leading the so-called startup boom. In other words, success of one startup is leading another to follow the same dream, eventually resulting in lesser number of original ideas and at the same time inflating valuations. And who knows, with this problem of plenty in the startup space, in no time this boom may soon turn into a bubble! However, that is not to say that all startups will fail. Some 20 to 30 per cent of ideas are sound, they are the ones that will stand out. “E-commerce companies that will be successful can be classified into two categories,” says M.K. Sinha, managing partner and CEO of IDFC Alternatives, a leading multi-asset class investment manager in the country. He adds that one category is those that addresses underserved areas while the other helps extract economic value by improving capacity utilisation of idle assets. This year, the total number of venture capital deals surpassed the total number of private equity deals. In the first half of 2015 alone, as many as 363 venture capital deals were sealed – more than three times the number of private equity deals, which stood at 99, according to Grant Thornton.