India vs China: Comparing Asia’s Two Largest Startup Ecosystems

india and china are among the world's top five largest economies they have gdps of 3.2 trillion dollars and 14.14 trillion dollars respectively and both countries have witnessed rapid growth since china announced its 1978 open door policy by opening its doors to foreign businesses and india's liberalization of its economy in 1991 which made it more market and service oriented and also expanded the role of private and foreign investment while the united states is currently the world's largest economy china and india are both expected to overtake it by 2030 to become the world's two largest economies now during these two countries early post reform years their growth was largely defined by traditional businesses growing at a steady rate however the internet changed that when it was made available to the public in both countries in 1995. all of a sudden the number of potential customers that businesses had access to exploded to include pretty much anybody who had an internet connection and while everybody capitalized on this opportunity differently there was a very specific type of business which was made possible by this internet explosion the startup these were companies that were typically started in people's bedrooms with whatever funds the company's founders could scrape together they didn't have a lot of employees they didn't have a lot of money but what they did have was the internet by the late 2000s smartphones started to replace feature phones and cell phones in both india and china and as the demand for mobile data increased because people were spending more time on these smartphones the cost of that mobile data decreased which resulted in an increase in internet penetration and also an increase in the opportunity for startups to access new customers let's take infosys as an example here because they're one of india's earliest and most successful i.t companies it was founded in 1981 that's 10 years before liberalization and 14 years before the internet reached india now after the internet reached india it only took infosys another four years to become a unicorn and a unicorn by the way is a startup that's valued at 1 billion or more so 18 years passed from the date that the company was founded until it reached that 1 billion market cap in 1999 which is kind of insane i mean take a look at udon they started in june of 2016 and just 26 months later they had achieved unicorn status and the situation is actually pretty similar over in china back in 2005 china saw one startup become a unicorn alibaba five years later in 2010 they saw another vancouver which is an e-commerce fashion retailer but between 2010 and today the number of chinese unicorns has exploded today there are close to 500 unicorns around the world and 206 of them are chinese india on the other hand is home to 31 unicorns making it the third largest startup ecosystem in the world now it might not seem fair to compare india's startup ecosystem to china's china after all has six times the number of unicorns but i feel like india's startup ecosystem is currently in a similar position to that of china's startup ecosystem in 2017. you had this startup explosion between 2015 and 2016 in china which is what india saw in 2018 followed by a bit of a low in 2017 which is what india is seeing right now but then things picked right back up for china in 2018 when 58 chinese startups became unicorns and i have a feeling that india might see a similar resurgence in 2021 or 2022. obviously things have slowed down a bit thanks to you know what but i still have faith that india will become the home of at least 50 new unicorns before 2025. and so with that in mind let's take a look at these two countries to see what india's startup ecosystem can learn from china's startup ecosystem successes and mistakes but before we jump in if you're not already subscribed now would be a great time to do so we post new videos every single week about indian startups entrepreneurs and the latest news also check us out on instagram because we're going to be hosting some live interviews with indian entrepreneurs in the coming weeks okay so back to startups and specifically let's talk about chinese startups because there's a bunch of reports floating around on the internet claiming that 10 000 new startups are created in china every single day other reports claim that china is home to more than 30 million startups that's three crore startups which is more than the entire population of nepal imagine an entire country where every single person is an entrepreneur now i know what you're thinking this is china those numbers are being stretched and companies that shouldn't qualify as startups are being included in that 30 million number but let's take a quick look at the united states where out of a population of 331 million people that's 33.1 crore people 31 million are entrepreneurs that means that one out of every 10 americans is an entrepreneur now china is home to 1.4 billion people that's 140 crore people so if we assume that one person is in charge of every single one of those 30 million startups that means that one out of every 48 chinese people is an entrepreneur which isn't that hard to believe and as we all know startups are usually founded by two or three people so that ratio of 1 in 48 could actually be closer to 1 in 16 or 1 in 24. now india on the other hand is home to around 80 000 startups and like i mentioned earlier 31 of those are unicorns this is significant and i'll tell you why like i mentioned earlier china is home to 206 unicorns that means that for every 145 000 startups that's 1.45 lakh startups china has one unicorn india on the other hand has one unicorn for every 2 580 startups meaning that indian startups are more than 56 times more likely to become unicorns than chinese startups one of the reasons that china has so many more startups than india 375 times as many in fact is because of how many startup incubators there are in the country now in case you haven't heard of startup incubators the term is taken from the name of the device that's used to warm eggs until they hatch similarly startup incubators foster the growth of early stage startups with things like mentoring seed funding office space and training so that these startups have a better chance of surviving and eventually thriving now china has roughly 11 800 incubators and in 2018 alone these incubators helped more than 620 000 startups at 6.2 lakh startups india on the other hand has just 520 incubators and these incubators are capable of supporting 6 200 startups every single year so going back to ratios here for a minute in india there's one incubator for every 154 startups whereas in china there's one incubator for every 2542 startups that being said though china's incubator programs are roughly four and a half times larger than indian incubator programs if china's incubators were the same size as india's there would be one incubator for every 577 startups which is a little bit more reasonable but i think the biggest takeaway here is that at this current rate of incubation china is incubating 100 times more startups than india is and incubated startups are more likely to succeed because they've received that mentorship and seed funding from the beginning now traditionally incubators have been physical places but that big thing that's been happening for the last few months has changed things a little bit and we've started to see a couple of incubators popping up online here and there but generally speaking a majority of a country's incubators are located in just a few key cities in china those cities are shanghai hangzhou shenzhen and beijing and that last one beijing which of course is the capital of china is also the unicorn capital of the world 82 of the world's 481 odd unicorns are from beijing that's nearly 17 of the world's unicorns and 40 percent of china's in india the startup hubs are delhi ncr mumbai hyderabad and of course the silicon valley of india bangalore of the 31 unicorns in india 14 of them or 45 of them are from bangalore but what about value like i said earlier indian startups are 56 times more likely to become unicorns than chinese startups but what if we just focus on the top three unicorns in both of these countries that should give us a rough idea of just how much potential both of these ecosystems have so on china's side we have bite dance didi cho jing and kwajo fight dance which is currently the world's most valuable startup is valued at 75 billion dollars or 5.6 lakh crore rupees and you've probably indirectly heard of these guys because of their extremely popular video sharing platform tick tock after bike dance we have didi chojin which is essentially china's uber in fact they acquired uber china back in 2016. td chao jing is valued at 56 billion dollars or 4.19 lakh crore fees and then finally we have beijing kwaja technology which is valued at 18 billion or 1.34 lakh crore rupees like bite dance their flagship product is a video sharing platform called quajo or quai for short and it's a direct competitor to tick tock these three startups have a combined value of 149 billion dollars or 11.15 lakh crore rupees now moving over to india the three most valuable startups are paytm by juice and oil paytm which is valued at 16 billion or 1.2 lakh crore b's is an alibaba-backed fintech and mobile payment startup that is currently competing with companies like walmart backed phone pay google pay and to a lesser extent whatsapp pay amazon pay and geopay then we've got the leader in india's ed tech space by jews which is backed by chinese multinational conglomerate 10 cent baiju's is valued at 10.5 billion dollars or 78 000 crore fees and then lastly we have indian hotel aggregator startup oyo which was last valued at 10 billion dollars or 75 000 crore fees although that might change because oyo has seen some pretty heavy losses thanks to you know what so the combined value of india's top three startups is 36.5 billion dollars or 2.7 lakh crore rubies which is a pretty substantial chunk of change but it doesn't really stand up next to the value of china's top three startups but of course valuations aren't everything in the world of startups things can change in a matter of weeks or even days sometimes how much you're worth matters less than who's backing you so with that in mind let's talk about investments between january and mid-november of 2019 chinese startups raised a total of 35.6 billion dollars that's 2.6 lakh crore rupees indian startups on the other hand raised 14.5 billion dollars that's 1 lakh rural bees in the entire year of 2019. in other words in 2019 china's startup ecosystem raised 2.5 times what india's startup ecosystem raised in the same year now if these funds were evenly distributed amongst all of china's startups each startup would get one thousand one hundred and eighty six dollars or eighty seven thousand seven hundred and six rupees whereas in india each startup would get one hundred and eighty one thousand two hundred and fifty dollars or one point three five lakh rupees each and i also think that it's worth mentioning that 2019 was a record-breaking year for india's startup ecosystem the ecosystem had never raised that much money before the previous record-breaking year was 2018 when india's startup ecosystem raised 10.5 billion dollars or 78 000 crore rupees so there was a 40 increase from 2018 to 2019. china's startup ecosystem on the other hand saw a 60 decrease in the amount of funds that it raised from 2018 to 2019. so it seems like investors might be starting to lose interest in china's startup ecosystem as it grows older the potential for massive returns for these investors is starting to diminish as markets mature and stabilize india's startup ecosystem on the other hand is still very chaotic there's still tons of room for growth and plenty of nascent markets for investors to dump their money into and you might have noticed earlier how i highlighted the fact that india's top startups are backed by chinese firms and that's purely because india has so much potential in fact out of that fourteen point five billion dollars or one lakh crore rupees that indian startups raised in 2019 4 billion or 30 000 crores came from chinese investors like tencent alibaba and xunui capital but what about the actual startup ecosystem what is it like on the ground if you're a startup entrepreneur in china versus india well the world bank has a list of 190 countries ranked by how easy it is to do business in them and back in 2015 china was in the middle of that list at number 90. its neighbors on that list were countries like serbia antiguan barbuda namibia and paraguay india on the other hand was ranked much much lower at 142 sharing their section on the list with countries like uzbekistan west bank and gaza sierra leone and gabon but fortunately for both countries they've left these positions behind china has moved up 59 places to 31st and india has moved up 79 places to 63rd but of course this is all just data what are things actually like on the ground well in 2015 on average it took 31 days to start a business in china and 29 days to start a business in india today though it only takes 9 days to start a business in china and 18 days in india so that might explain why there are so many more startups in china than in india simply put the chinese government has reduced barriers and cut down the number of steps required to start up while the indian government has been slower to reduce these barriers at least so far in the past though the indian government has said that they're committed to reducing the number of days that it takes to start a business to just five days then in terms of raising funds which is a pretty big part of a lot of startups journeys india like i said earlier has been attracting more and more investments over the years and this was reflected in their rising position on the world bank's list now you would think that whether or not a country startup ecosystem attracts investors or not would be largely dependent upon how much potential the startups in that ecosystem have if the startups in that ecosystem are doing well then the investors come knocking right well actually that's just one side of the coin the other side of the coin is protection investors need to feel secure in their investments they need to feel that there are rules and regulations governing the startups that they're going to be investing in otherwise they won't want to invest for example if a startup ecosystem is known for its lack of transparency and disclosure with minority shareholders or for the misuse of funds raised from those shareholders or even for a lack of legally protected rights for shareholders then there's not going to be any shareholders investors just won't feel comfortable investing in an ecosystem like that no matter what kinds of opportunities the market offers and of course without investors a startup ecosystem's growth will be stunted and as a result the country's economic growth will be stunted as well so long story short minority investor protection is a very important metric in a country's overall ease of doing business score back in 2015 china was ranked 130 for its minority shareholder protection and india was ranked seventh by 2019 though india's score had decreased slightly to 14th while china's score had increased significantly to 28th so india has been slipping a little bit in this category but they're still doing a better job than china at making their country safe for investors and that's all thanks to the government's shareholder protection policies but i also think that it's worth taking a look at what both of these countries governments are doing to directly promote entrepreneurship so the chinese government launched its mass entrepreneurship and innovation program in 2015. and so china witnessed what is known in china as its fourth wave of entrepreneurship in order to accomplish this the chinese government did things like providing startups with financial support creating technology infrastructure revising outdated laws and regulations tax reductions and exemptions and just generally trying to make entrepreneurship more accessible to everyday people india has taken a similar approach with its startup india campaign which was launched in 2016 with the goal of increasing entrepreneurship and innovation in the country prior to startup india just four indian states had implemented startup related policies today though 26 out of india's 36 states and union territories have enacted startup policies to promote entrepreneurship the indian government has also created a 10 000 crore rupee fund that's a 1.3 billion dollar fund which they're calling the fund of funds and they're using it to invest in emerging startups out of this 10 000 crore rupees 3582 crore rupees that's 480 million dollars has been invested into 338 indian startups now while 10 000 crore rupees might seem like a pretty big number it's actually less than one tenth of what india's entire startup ecosystem raised in 2019. china's government on the other hand has set aside 24 lakh crore rupees for promoting chinese startups that's 320 billion dollars or nine times what china's startup ecosystem raised in 2019. so china's government is definitely giving its startup ecosystem more financial support than india's government is giving to its startup ecosystem and that's one of the reasons why indian startups tend to end up raising funds from outside investors and specifically they raise a lot of funds from chinese investors now in response to this and also in response to the potential for chinese vc firms to capitalize on the need for funds that a lot of indian startups are facing right now because of you know what which would result in even more chinese ownership of indian startups than there already is the indian government introduced policy reforms in 2020 which make it more difficult for chinese investors to invest in india but some people have criticized this move saying that if the indian government wants to start walling off chinese investors then they need to make sure that those funds are coming from somewhere else because it doesn't look like those funds are going to be coming from the indian government and so far india just doesn't have homegrown tech giants that are willing or capable of investing as much as chinese investments like 10 cent alibaba and xiaomi indian startups rely on foreign direct investment because they don't have any other choice those funds just aren't available to them within india in 2019 10 or less of the funds raised by india's startup ecosystem came from within india compared to 27 from china and 62 from the united states so will india's startup ecosystem overtake china someday only time will tell we know that probably by 2027 india's population will overtake that of china's but whether or not india's startup ecosystem does or not will largely depend on the performance of india's economy as a whole like i mentioned at the beginning of this video india has a 3.2 trillion dollar economy whereas china has a 14.14 trillion dollar economy so india definitely has a long way to go before it can take its place as an equal next to china but i don't think that that's impossible especially with china's reputation right now i just think that it's going to take a while however in the meantime i think that india should definitely be proud of its startup ecosystem and the fact that it's the third largest startup ecosystem in the world to me that's something worth celebrating if you enjoyed this video please give it a thumbs up and subscribe if you haven't already thank you guys so much for watching this episode of backstage with millionaires and i will see you in the next one

Channel: Backstage With Millionaires

Views: 161,767

Rating: 4.8250413 out of 5

Keywords: india, china, india vs china, comparing asia’s two largest startup ecosystems, indian startups, indian startup ecosystem, chinese startup ecosystem, comparison, startup comparison, india vs china startup comparison, india vs china startup, make in india, aatmanirbhar india, aatmanirbhar bharat, startup india, entrepreneurship, chinese startups, india vs china 2020, startup news, indian startup news, startupgyaan, startup gyan, intellectual indies, most valuable startups

Id: M0uz5jjo0gI

Length: 20min 0sec (1200 seconds)

Published: Sat Aug 22 2020

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