Ban on Chinese Apps: A virtual strike

The Indian government is on a Spree of Banning Chinese Apps and we have to talk about it!

In this newsletter, we analyze the impact of the ban on Chinese Apps in India and the Start-up Ecosystem. 

In June, Government ordered a ban on 59 Chinese mobile apps citing it was prejudicial to sovereignty and integrity of India, defense of India, the security of the state and public order”.

Videos of Indians breaking and burning functional Chinese appliances, such as television sets, have been doing the rounds in social media. Ramdas Athawale, a government minister, even demanded a ban on restaurants selling Chinese food. Well, we are not security expert to comment on this move by the government but definitely, we can talk about the impact on the Start-up Ecosystem. Before understanding the impact of the ban, let’s understand how China is Deep-rooted in the Indian Start-up Ecosystem.

According to a report by Gateway House, Chinese tech investors have put an estimated $4billion across 90 Indian start-ups operating in various sectors and 18 out of India's 30 unicorns (Unicorns are start-ups with $1 billion valuations) have Chinese investments. The unicorns range from Flipkart to the newest unicorns such as Dream11, Delhivery, and Rivigo.

Well ,how can we miss the Smartphone category, the smartphone market in India has one of the deepest Chinese penetration. Chinese smartphones dominate over 70% of the Indian smartphone market. Chinese Investors were pumped about India growth story due to virgin and untapped internet users and availability of business model similar to China but dream party did come to halt after a government move in April (amending FDI Rules) and in June (ban of Chinese Application).

What Chinese Investors brought to the table was a large pool of capital, ability to cut larger cheques, patient capital, deep tech experience and experienced investors which was clearly missing in the home-grown pool of capital and the recent event will halt the investment spree by Chinese Investors. As reported by ET, Investors have withdrawn term sheets and halted Investment committed, adding that they were waiting for clarifications from the government on the policy tweak. Chinese investors are now exploring alternative jurisdictions like Vietnam and Indonesia.

It’s clearly Indian Start-ups who will be impacted who are still struggling to get profitable is the absence of a home-grown pool of capital. 

Well there is another side of the coin and this is well explained by Vijay Sharma, CEO and founder Paytm, said on Twitter, “Bold step in the national interest. A step towards the Atmanirbhar App ecosystem. “It’s time for the best Indian entrepreneurs to come forward and build the best by Indians, for Indians!” 

Indian Apps like Chingari, Mitron, and Trell have been benefiting from the Chinese App ban. On June 29, founder Chingari, Sumit Ghosh, tweeted, “100,000 downloads per hour, guys please be patient! We are working on the servers and getting things up and running asap!” Clearly, no one was ready with the force and it did come like a storm.

Well buckle up guys, Make in India will have a roller coaster ride and I am excited about the same. Are you?