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Startups

Non-Chinese Asian startups outraise their Chinese peers

Singapore's Grab among four Southeast Asian or Indian companies on top-10 list

In the first three months of this year, Asia-Pacific startups outside of China raised $7.2 billion, up 5% from a year earlier. Chinese startups experienced a 65% plunge in fundraising for the same quarter.   © Reuters

TOKYO -- Fundraising by Southeast Asian and Indian startups is on a noticeable upswing amid Sino-American trade friction that is scaring foreign money out of China.

In the first three months of this year, startups in the Asia-Pacific region, excluding China, raised $7.2 billion, up 5% from a year earlier. During the same period, the amount raised by Chinese startups plunged 65% to $5.8 billion, according to data compiled by consultancy KPMG.

It was the first time in roughly five years for Indian and Southeast Asian startups to outraise their Chinese peers.

The change is noticeable in a top-10 list that ranks startups by how much they have raised. While the entire list was occupied by Chinese companies in the April-June period of 2018, it included four Southeast Asian and Indian companies in the three months through March.

In the first quarter of 2019, Singaporean ride-hailer Grab topped the list, raising a total of $4.5 billion from such concerns as the SoftBank Vision Fund and Microsoft. Indian logistics provider Delhivery made the list with some $400 million and has joined the club of "unicorns" -- a term used for a startup valued at $1 billion or more.

Fundraising by startups in the Asia-Pacific region, excluding China, increased for the second consecutive quarter, reflecting an increase in the number of newly established companies.

India has more than 7,000 startups, according to a local information technology industry organ. In 2018 alone, more than 1,200 companies were established.

India is also home to nearly 20 unicorns, and more than five startups are expected to join them in 2019.

The country has a population of 1.3 billion. Another 600 million people live in Southeast Asia. As communications networks develop to serve more of these inhabitants, they are also paving the way for IT startups to expand.

"India in particular is attractive to investors because it has a highly transparent [form of] capitalism, despite its position as an emerging market," said Yuji Horiguchi, head of Singapore-based venture capital firm Spiral Ventures. As a result, Horiguchi said, the inflow of investment money is finding its way to an ever more diverse selection of startups.

In China, the big slowdown in the flow of cash to startups is partly a reaction to the previously overheated investment environment, according to Philip Ng, a partner at KPMG China.

U.S. investors have been major suppliers of funds to China. But the number of those active in the country has been decreasing.

Now, SoftBank Group of Japan, Sequoia Capital of the U.S. and other big international investors are expanding their footprints in India and Southeast Asia.

This shift began in the middle of 2018, when U.S. retail giant Walmart acquired Indian e-commerce platform Flipkart for $16 billion.

"Investors and others who have earned large returns are pouring more risk money into India and Southeast Asia," said Teruhide Sato, founder of venture capital firm Beenext, which has invested in more than 90 companies in Asia. "The trend is expected to continue."

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