Indian startups: Korean VCs' new target after China

South Korean venture capital firms and online giants are flocking to startups in India, a country with the world's second-largest population and lower regulatory risk than China.

Krafton Inc., backed by China's internet giant Tencent Holdings Inc., recently invested $5 million in FRND, India's dating app. It led FRND's $6.5 million series A funding round, in which India Quotient and Elevation Capital joined, Krafton said on Monday.

FRND allows users to connect with each other through games and live-streamed formats in 10 Indian languages. The dating app will use the new funding to expand its services into other languages and upgrade search algorithms. 

"FRND has a huge growth potential thanks to its unique local product, which global companies will find tough to adapt to," Krafton's India division head Sean Hyunil Sohn said in a statement.

Prior to the investment in FRND, the developer of the popular battle royale game PlayerUnknown’s Battlegrounds (PUBG) put $22.4 million into India's e-sports and gaming platform Nodwin Gaming in March of this year.

This June, it invested $9 million in Loco, an Indian streaming platform for video games, as a seed-stage investor. In the following month, it made a $45 million investment in Indian web novel platform Pratilip.

Krafton's investments in India's IT startups amounted to $80 million to date. Recently, it committed an undisclosed sum to India's early-stage investment VC 3one4.

VENTURE CAPITAL

KTB Network Co. was the first South Korean VC firm to invest in an Indian startup. Back in 2016, it invested in NoBroker, a real estate platform, which recently joined the ranks of unicorns, or a private company with a valuation of over $1 billion.

KTB also participated in two funding rounds for India's Grofers between 2019 and September of this year. SoftBank's Vision Fund is the largest shareholder in the online grocery startup.

This July, the Korean VC house poured about 6 billion won in Trell, an Indian alternative to China's video app TikTok.

Another Korean VC firm KB Investment Co. boasts a portfolio of eight Indian startups, including online education service Vedantu; PharmEasy, an online pharmacy; and Spinny, a second-hand car seller. It is now considering launching a new India-dedicated fund.

The Ventures, a newcomer to South Korea's VC industry, recently invested in two Indian startups: travel platform TravClan and Astrome, a wireless technology startup.

YOUNG POPULATION

India's 1.38 billion population, just shy of first-ranked China's 1.4 billion, signals the huge growth potential of Indian startups.

In particular, the youth population, or those aged between 18 and 35, makes up more than half of the country's population. The majority of the young generation are smartphone users as well.

"Its overwhelming population size will fuel their startups' explosive growth," said a VC industry source. "Also, India is benefiting from China's crackdown on IT companies."  

China has introduced measures to tighten scrutiny of technology companies for data security and anti-monopoly reasons, wiping out billions of dollars off Chinese tech stocks.

India is home to 48 unicorns, of which 28 firms made it to the list this year, according to research firm CB Insights. Among them, Byju's, India's largest education startup saw its value soaring to $21 billion in its latest funding round.

Last month, the operator of Paytm, India's mobile payment app, raised $2.5 billion in the country's largest-ever IPO. The fintech has received investments from SoftBank's Vision Fund and Warren Buffet's Berkshire Hathaway.

Separately, South Korea’s top online platform operator Naver Corp. and brokerage giant Mirae Asset Securities Co. are aggressively investing in promising startups and businesses in India. India accounts for 75% of both companies’ fresh investment in overseas startups this year as of October.

Write to Jong-woo Kim at jongwoo@hankyung.com
Yeonhee Kim edited this article.