Chinese funds hiring Indian executives as they seek to hike deal flow from region

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Chinese venture funds such as Shunwei Capital, CDH Investments and Morningside Ventures have either hired or are looking to hire associates in India as they look to increase the deal flow in the country, said two people familiar with the matter, requesting anonymity.

The move underscores the importance of the Indian startup market for the Chinese funds, which have started investing heavily in the country over the past two years. For instance, 2018 alone has witnessed over $900 million worth of investments from Chinese investors.

In fact, Chinese funds have become more active on the ground, engaging with the Indian ecosystem rather than just coming and scouting for deals. “CDH executives are here (in India) every second week and they will soon open an office in India. Morningside has already opened an office,” said an entrepreneur familiar with the plans. “They’ll also start hiring analysts and associates.”

Shunwei Capital, which has made several investments in India, including in ShareChat, Krazybee, Cashify and Pratilipi, has recently hired Arpit Beri as its vice-president for India investments. Beri was formerly an associate with SAIF Partners.

Chinese funds have become extremely bullish on the Indian consumer internet market and are looking at companies that are similar to the ones in China and have had success stories.

“A lot of financial investors are exceedingly positive on the India market, especially in the consumer and fintech space,” said an investor familiar with the strategy of these funds. “They are looking for models that have somewhat parallels in China.”

A case in point is Cashify, an online marketplace for used smartphones and electronics, which is backed by Shunwei, Morningside and CDH. Its China equivalent is re-commerce giant AiHuiShou, which also came in as Cashify’s strategic investor last year. Both have Morningside as a common investor.

“AiHuiShou is valued at over $1.5 billion and is profitable, which gave us a lot of perspective with respect to scale,” said Mandeep Manocha, CEO of Cashify, which had raised $12 million in 2018. “Our projections changed completely when we visited them in China and saw their scale, which was 20X of ours.”

In November 2018, Shunwei Capital raised one ofshare its largest funds at $1.21 billion for its global investments, indicating more deals will be made in 2019. Chinese funds are looking at various sectors including logistics, vernacular content and cross-border e-commerce, according to several entrepreneurs and venture capitalists Mint spoke with.

“Chinese investors are primarily interested in the consumer story in India because they see (China) parallels here,” said Sanjay Nath, managing partner at Blume Venture Advisors, which has also invested in Cashify. “However, earlier they wanted to invest in companies at the growth stage, but now they are looking at coming in early, and trying to discover companies at an early stage.”

Shunwei Capital, Morningside and CDH did not respond to queries sent by Mint.

A Xiaomi spokesperson said: “We have invested in a large number of internet companies in India, including Zest Money, Krazybee, Hungama and many more. The idea is to invest in companies where we think there could be a long-term strategic partnership.”

This article was first published on livemint.com