Flying from China's Silicon Valley, Shenzhen, to Indian counterpart, Bangalore, requires nine hours and at least one transfer. However, this is not stopping Chinese capital from pouring into India. Indian rising star ShareChat completed a 100 million USD fundraising round in August, with Chinese Internet giant Tencent showing an interest in the company.
According to financial data company Pitchbook, Tencent is considering acquiring 30.77% of ShareChat's shares, with discussions between the two firms having lasted around half a year. India local media also unveiled that the negotiation has gone on since this March. Many signs indicate that Chinese tech giants are poised to get more power in India’s social media sector.
Founded in 2015, ShareChat has reaped the rewards from the rapid spread of the Internet and smartphones in India. It has quickly become a star among Indian start-ups. Starting as a vernacular online chatroom, Sharechat gradually evolved into an information feed featuring images and videos. ShareChat users can follow others and consume various types of content based on their interests, including humour, fashion, health and religion.
ShareChat is becoming one of India's most popular content platforms. With the intensive completion with the global giants such Twitter and Facebook, vernacular content is the selling point of ShareChat.
ShareChat founders Ankush Sachdeva, Bhanu Singh and Farid Ahsan are all from middle-class backgrounds, graduates of the prestigious Indian Institute of Technology. They developed a total of 13 products before ShareChat, but it was the latter that opened up a new chapter for Indian Internet start-ups.
"Of the 1.3 billion Indians, there are no more than 100 million that speak English," according to journalist Vishal Krishna in a report about the Indian vernacular market. Despite this, most Indian websites and apps use English as the language of operation.
We never see vernacular users from small Indian cities or rural regions on Facebook. However, all global Internet companies view this group as having huge potential to be among "the next billion Internet users".
The entry barrier facing foreign companies is the complexity of local Indian language content. India's constitution recognises 22 official languages, of which nine are supported by Google and 20 by ShareChat.
Indian vernacular is not a barrier to Chinese capital at all. ShareChat is becoming a landmark of China-India business exchange.
According to Indian government and Pitchbook information, after ShareChat's latest fundraising round led by Twitter completed in August, Chinese capital continues to hold an increasing share, Xiaomi and its close ally Shunwei account for 18.36%, while Shanghai-headquartered Trustbridge, 5%.
Tencent, meanwhile, has expressed the willingness to get a piece of cake from India. ShareChat founder Ankush Sachdeva confirmed in April that ShareChat was in contact with Tencent. "It is very significant that Tencent is interested ShareChat, because besides money, Tencent can also connect us to a wider social network."
According to Pitchbook information, Tencent hopes to obtain 30% of ShareChat shares, which would bring the total proportion held by Chinese capital to around 70%. While it is unclear whether or not ShareChat will become the next Indian unicorn, it is possible that Chinese firms will play a larger and help them to bridge to more Chinese capital.
As India heads towards universal access, Chinese investors - who have themselves experienced the leapfrog development of the Chinese Internet industry - have been the first to spot the opportunity. Chinese companies have left their trace in every step of ShareChat's development.
In 2017, user generated content on ShareChat began to exceed that of communications application WhatsApp, and ShareChat's total revenue increased 14 times. That year, Beijing-based founder of Xiaomi Lei Jun noticed the company.
In January 2018, Xiaomi led ShareChat's B round, with Lei Jun's venture capital fund Shunwei and SAIF Partners also investing. Eight months later, Shunwei once again led a new round of investment in ShareChat. In addition to Xiaomi and SAIF, new Chinese investors Morningside Venture Capital and Trustbridge Partners also participated. Morningside is also an old shareholder of Xiaomi, and has continued to invest in Xiaomi since its A round.
Chinese interest in the Indian vernacular market began with Xiaomi. Xiaomi is still the most active Chinese investor in that market. Since entering the Indian market in 2015, Xiaomi has been deeply involved in the local retail market, and has a deep understanding of the Indian market. The speed of its investment is most evident in emerging fields such as vernacular and financial technology.
India is a strong market for Xiaomi. Canalys data shows that in the first quarter of 2019, global shipments of Xiaomi's mobile phones dropped by 10%, but in the Indian market, Xiaomi maintained growth. In fact India is the only country in the Asia-Pacific region in which Xiaomi's shipments are still growing. Xiaomi’s market share there reached 31.4%, far exceeding the 12% market share in China during the same period.
For Xiaomi, supporting a local social media firm has a strategic significance beyond financial returns. For ShareChat, accepting investment from a Chinese mobile hardware company is not just about gaining money and pre-installation. It is an obvious win-win that all mobile phones sold by Xiaomi in India are pre-installed with ShareChat.
Today, ShareChat is one of India's largest social media platforms, and Xiaomi has had the biggest share of the Indian smartphone market for eight consecutive quarters.
India - Diamond mines for global capital
Chinese companies and capital have played a significant role in the rise of ShareChat. The most important thing may be the judgment that Chinese capital brings. Predicting the next trend of one billion people is actually a very difficult problem. However, those familiar with the Chinese entrepreneurial ecosystem may make more accurate assumptions, and the miracle of China's growth may also foretell what will happen in India.
ShareChat founder Ankush Sachdeva said in an interview with Chinese media recently that China is even more advanced in business models than the United States, and that China's demographics are more similar to India's. Therefore, through Chinese investors, ShareChat may be able to determine how different products will develop, and how large numbers of people will make their choices in a given scenario.
ShareChat also learned algorithmic recommendation from its Chinese shareholders. After getting investment from Xiaomi and Shunwei, ShareChat said it would use the funds to mine user information and develop machine learning and artificial intelligence technology.
Ankush Sachdeva has come to China for fundraising three times and has negotiated with many leading Chinese investors. It is reported that he has his own WeChat account and has reached a relatively skilled level of Chinese.
After 20 years of Internet development in China, member of the first generation of entrepreneurs Lei Jun and established investment institutions know more than others what a successful social company looks like in India.
In China, Tencent has relied on its own social network to conquer half the Chinese Internet, building strong walls around its territory including in gaming, digital content/copyright, big data, finance, etc. WeChat is already a national application in China.
However, WhatsApp and Facebook blocked the pace of WeChat's overseas expansion. Tencent wants to copy WeChat in India but has to learn from Alibaba's approach and turn to investing in local companies. If it can successfully cooperate with ShareChat, it will be an effective complement to Tencent's ongoing social media expansion strategy.
Tencent has been in India for a long time. In 2015, Tencent invested in Indian medical company Practo; in 2016, Tencent successively invested in social networking company Hike and travel company MakeMyTrip. In 2017, Tencent invested $700 million in India's most valued Indian e-commerce giant Flipkart, and invested in Ola, India's largest mobility company. Since then, Tencent has continued to invest in the parent company of the Indian financial technology company PolicyBazaar, Indian music streaming company Gaana, food delivery application Swiggy; Tencent's investments in India have been truly diverse.
China's capital is heading to the global market and has boldly rushed to stake its claim through investment and acquisition. Previously, the most successful case of a Chinese company investing in India was Ant Financial's investment in the Indian financial company Paytm.
After continuous capital injection, Alibaba is the largest shareholder in Paytm, with a 30.15% stake. Through Alibaba's continuous supply of technology and business models, Paytm quickly emerged as a local payment giant. Ant Financial, in turn, was able to leave licensing and regulatory challenges to Paytm. Alibaba's investment in Paytm provides an excellent example for Chinese companies looking to go overseas, but the impact of Chinese capital on ShareChat may be even more significant.
Just as overseas capital came to China 20 years ago, Ankush Sachdeva said that India is Chinese capital's "diamond mine", and China lives in the future.
(Article authored by James Chen)