China tech crackdown is India's gain: US venture investor March Capital

Indian startups in internet and cloud software offer strong growth prospects but without Chinese firms' risk: Sumant Mandal.

China’s crackdown on its technology industry means global investors seeking emerging-markets exposure will turn their attention to India, said Sumant Mandal, a managing partner at U.S. venture investor March Capital Partners.

Investors are now putting more weight on “government risk” as they assess Chinese technology companies, Mandal said in a video interview. Indian startups in areas such as internet and cloud software offer strong growth prospects but without a similar risk profile, said Mandal, co-founder of the Santa Monica, California-based firm.

Chinese regulators are reining in unruly internet companies in a campaign that spans everything from gaming to “money worship,” raising questions about their growth and earnings prospects. While India’s internet industry is trailing far behind that of China in size, it’s recently produced new billion-dollar startups and initial public offerings at an intensifying pace.

“China’s market is of a size and scale that’s unmatched,” Mandal said. “But the risk-reward structure around China has changed” and investors from the U.S., Europe, Asia and the Middle East are now looking to balance their portfolios by re-routing investments to its neighbor, he said.

March Capital has a long track record of backing Indian startups and it plans to increase such investments, he said. The coronavirus has changed consumer behavior in India, a boon for companies handling e-commerce and digital transactions.

The firm has more than $1 billion in assets under management, including a $450 million fund which closed early this year. Last month, March had two exits in India that represented nearly $6 billion in combined deal value: Online payments service BillDesk was acquired for $4.7 billion, just days after CarTrade Tech Ltd. had its IPO.

Mandal leads March’s investments in areas such as blockchain, network infrastructure and software as a service, or SaaS. More than two dozen India-born SaaS startups have moved to the U.S. to successfully win global customers and garner hundreds of millions of dollars in revenue, he said.

“Now there’s more of a belief system around India,” he said. “The size of startups like Flipkart, Byju’s and BillDesk changes everything.”