Indian startups have been handed an incredible opportunity to reach new investors

Image: Reuters/Enny Nuraheni
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Some of the world’s leading startup investors—like Tiger Global and Sequoia Capital—have been dabbling in India for several years now. They should probably start preparing for a lot more company.

With China now targeting a minimum growth rate of 6.5% a year until 2020—the lowest growth forecast that the country has had since the late 1970s—India stands to siphon off some of the venture capital that otherwise might have flowed into China.

“VCs make strategic bets on countries, regions, companies—and therefore, to an extent the slowness in China may be of help to Indian companies from a funding perspective,” says Yugal Joshi, who leads the digital research practice at Everest Group, a US-based research and consulting firm.

And while a number of new investors have arrived in India of late—including Chinese e-commerce giant Alibaba, Japanese internet major SoftBank, and Google Capital, the late-stage VC fund of the internet search giant—it will take a lot for India to close the gap with China, which currently gets the lion’s share of the VC money in the Asia-Pacific region.

According to the research and analytics firm Aranca, the region overall attracted $38.9 billion (Rs255,000 crore) in VC investments in 2014, trailing only North America’s $59.9 billion. “[W]ith China’s economy showing signs of subdued growth in recent years, investors might turn their attention toward India in the long run,” Aranca wrote in a recent report (pdf) on the region’s evolving VC market.

The key phrase to keep in mind here is “long run.”

“From a business perspective, we still hear a lot more about China than we do about India,” says Anand Sanwal, the New York-based CEO of research firm CB Insights.

Of course, old habits can be hard to break—and steering VC money into China over India is indeed an old habit.

But China’s economic slowdown could prove to be a major accelerant for a change in investor habits—and for India’s startups.