Cos exiting China favour Indian startups

In early 2020, as the pandemic was shutting down global commerce, a Pennsylvania company was having trouble getting its usual steel parts out of China. It stumbled on another possible option-in India.

- Aruna Viswanatha

Zetwerk, a two-year-old startup connecting customers and manufacturers within the country, had never handled a U.S. order, but tapped its network of suppliers and delivered the parts. It is now a provider of everything from nail clippers to steel frames for U.S. customers, and is valued at $2.7 billion, with funding from Greenoaks Capital, Lightspeed India, Peak XV Partners and others.

India has been trying to lure some of the world's biggest companies to set up new factories after repeated lockdowns under Beijing's zero-Covid policy and rising geopolitical tensions with the West prompted many firms to look for alternatives to China, in a strategy referred to as "China plus one."

Venture capital in India has taken note. Investors such as Peak XV, which was Sequoia Capital India until in June it announced a split from the U.S. firm, and Lightspeed are increasingly trying to back founders whose businesses involve boosting India's global exports. Previously, they had focused on generations of Indian start-ups that primarily targeted the Indian consumer market.

Business-to-business e-commerce startups, such as Zetwerk, have seen increased deal activity in recent years, according to a PwC India report. Funding in that sector was more than three times as high in 2021 and 2022 as in the two years before that, according to data from Tracxn.

While VC funding has slowed in India in 2023, as it has in the U.S. and Europe, business-to-business investments remain one of the prime areas of financing in India.