India vs China (2023): Comparing Asia's Two Largest Startup Ecosystem

In this detailed video, we take a look at and compare the startup ecosystems of India and China.

In the last decade or so, China, which many people still call the world’s factory, has actually slowly weaned its economy off of manufacturing, and diversified into tech, with BATs leading the charge, that’s Baidu, Alibaba, and Tencent.

In 2021, Chinese startups raised a whopping 130.6 billion dollars in venture capital which is three times more than the 42 billion dollars that Indian startups raised during that same year.

India, which is the third-largest startup ecosystem in the world, raised 42 billion dollars in 2021, which was the best year on record for Indian venture funding, was more than 15 billion dollars less than what Chinese startups raised all the way back in 2015.

Talking about valuations of single startups, India today has four decacorns - that’s companies that have a valuation of more than 10 billion dollars, and these companies are Flipkart, Byju’s, Swiggy, and Nykaa and if we take all four of these companies and combine their valuations, they’re actually still less valuable than China’s single-most valuable hectacorn, Bytedance, which is known for its flagship short video-sharing app TikTok, and is currently valued at a whopping 300 billion US dollars.

Talking about investor's trust in the ecosystem, India has a much more open ecosystem when compared to China. Flipkart is owned by Walmart, but ByteDance’s ownership isn’t clear. Yes, they have raised upwards of 9 billion dollars from investors, local and international, but how much control do those investors actually have over their China-based portfolio companies? It’s hard to imagine international stakeholders voting against the desires and agenda of the CCP.

Taling about protecting their local businesses, both India and China are pretty ahead on that. India for eg, has banned Chinese companies like TikTok and Shein. Thanks to protectionism, startups like Moj, MX taka tak, Chingari, and Josh have been able to thrive. China also banned merican companies like Facebook, Google, and Dropbox. Other American companies like Tesla, Apple, Starbucks, and Nike have a strong presence in China, but are also very careful to play by the CCP’s rules.

India however, is ahead of China when it comes to growth in minting unicorns. The rate of growth among unicorns in India, 36% growth from 2019 to 2020 and over 100% growth in 2021 and if you take a look at China’s growth, 8% growth in 2020 and just 14% growth in the year 2021, India is clearly ahead. AAnd according to Inc42’s ‘The State of Indian Startup Ecosystem Report’ India will beat China to become number two in terms of total unicorns by the year 2025.

When we talk about which sectors are dominant in both countries, most valued startups in India come from Ecommerce, followed by Fintech and SaaS. For China, the leading sectors are Finance, Internet and Logistics.

In terms of where this startups are coming from, In India, most of the companies with a valuation upwards of a billion dollars are located in Bengaluru followed by Delhi NCR and Mumbai. On the other hand, startups in China are located along the east coast, such as in Beijing, Shanghai, and Shenzhen.

Beijing is known for its booming artificial intelligence, big data, and fintech startups and about 70% of the country’s potential unicorns are located here. Standing up to Beijing is Bengaluru which has a mix of sectors, ranging from e-commerce to fintech to agritech and EVs.

In the last few years however, focus is shifting from China to India, when it comes to growth. Last year the Chinese Communist Party started a massive crackdown on tech giants, education, and entertainment firms in order to pursue the ideology of “common prosperity”- which seeks to narrow the stubborn wealth gap between the rich and the poor.

These crackdowns by the government have already wiped out $1.5 trillion US dollars in market value last year and have left investors from around the world terrified of losing their multi-million dollar investments.

India on the other hand is slowly replacing China as the preferred destination of investment for these western firms. China plus one strategy - where world is looking for another place for manufacturing is also set to help India massively in coming years.

India is being viewed as next growth engine for the world’s economy and Indian government is also playing a key role in all of this. It’s efforts towards easing regulations, providing good infrastructure, and promoting entrepreneurship across the country through programs like Aatmanirbhar Bharat, Gatishkati, and Startup India are starting to show results.

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