MUMBAI -- Investment in Indian startups reached a record high in 2017 amid bigger investments in promising young companies, another sign of Asia's growing prominence in the venture capital world.
A total of $17.6 billion was invested in nonpublic Indian companies in the nine months through September, beating the full-year record of $17.3 billion set in 2015, according to Venture Intelligence, a research arm of India's TSJ Media. The total for all of 2017 could top $20 billion.
Venture capital investment in China over the same period exceeded 120 billion yuan ($18.3 billion). Total investment in the two countries equates to nearly 70% of the U.S. figure.
Indians who have studied at prominent American and European universities or worked at big overseas technology companies have been flowing back into a country with steady economic growth in the 6% range and an abundance of experienced, English-speaking tech workers. Some of these returnees are finding success building their own businesses.
New India-focused private equity funds have been springing up amid growing investor interest. Japanese venture capital firm Dream Incubator will soon set up a fund with up to 5 billion yen ($44.2 million) in capital, investing in startups in such fields as entertainment, health and financial technology, or fintech. Mumbai-based Aavishkaar recently established a sixth fund capitalized at $92 million that will fund fledgling companies in agriculture, financial services, renewable energy and other industries.
Big businesses in China, the U.S. and Japan are getting in on the act as well. China's Tencent Holdings, Microsoft and American auction site eBay agreed in April to invest a total of $1.4 billion in Flipkart, India's largest e-commerce company. The SoftBank Vision Fund, run by Japan's SoftBank Group, decided in August to back the Indian retailer as well. This funding will help Flipkart improve its lineup and services to better compete with the Indian arm of U.S. behemoth Amazon.com.
Tencent led a $1.1 billion funding round announced in October for ANI Technologies, operator of Ola, India's top ride-hailing service. ANI, which competes with Uber Technologies of the U.S., plans to use the proceeds to hire more drivers and accelerate tech development. SoftBank and American investors also participated in the round.
China's startup scene is somewhat more mature than India's. Tencent and Alibaba Group Holding have grown past the startup stage and are now funding young companies themselves, seeking to expand their own reach and generate synergies with their existing businesses.
An Alibaba-affiliated venture capital fund recently invested in WeLab, the Hong Kong-based operator of Wolaidai, a mainland Chinese platform for small-scale lending. Tencent has bought a stake in online movie-ticketing service Maoyan. The tech giants have taken sides in the cutthroat bike-sharing market, with Tencent and Alibaba backing Mobike and Ofo, respectively.
India and China each have massive populations exceeding 1 billion. Not only are they attractive consumer markets, but they have also become giant testing grounds for new technologies such as big data and artificial intelligence. Both have the potential to produce distinctive new business categories and innovations not found in Silicon Valley.