De-risking the Dragon, embracing the Elephant

China's promise of reciprocity over the past 30 years was a lie, Mark Kahn said, and a deliberate, highly successful long-term strategy. Mark, who runs the Indian venture fund Omnivore, does not expect India to try the same thing. There is no central plan in India to export its surpluses and grow at the expense of others' industries. "India is too chaotic to pull off that level of strategy," Mark said. It is part of the case Mark and Divya Murthy of OysterBay made for India as Europe's next partner. Some of the investors and founders at their Ripple were less sure India can deliver.

Europe outsourced its energy to Russia, its manufacturing to China and its security to the US, Divya said, and the past few years showed why that strategy needs rethinking. Mark described China's change from the best export market for Germany's Mittelstand into a sword hanging over it, ready to dump excess capacity on European manufacturing. India is big, growing and able to produce at low cost, nowhere near as well as China but better every day, and it is committed to democracy, diversity and human rights. The new EU–India trade deal was first conceived in 2007, Divya said, and India, a protective economy, gives up more than Europe in opening its tariff lines.

Four reasons to go

Omnivore's mainly European backers keep asking how to work in India. Mark's answer came in four parts. Research first. Companies can probably cut their R&D costs by 80% in India, and facilities that were once terrible have improved sharply. Talent second, since almost every educated Indian speaks English and India's biggest export is talent. Manufacturing third. It is not as seamless as Shenzhen, but intellectual property is protected and the risk of creating a future competitor is far lower. Mark advised writing arbitration into contracts so that you never see the inside of an Indian courtroom. Sales last, because India's markets, unlike China's, are now wide open to European companies.

Divya added that India has exported deeply technical production such as pharmaceuticals and biotech for decades. Some robotics start-ups in OysterBay's portfolio outsource their entire software stack to India at a tenth of the cost of building it in Europe.

India is too chaotic to pull off that level of strategy.

Leaving China

Some participants had already turned away from China. An investor said their fund stopped investing in China, although the investments were going well, because rules could change overnight, as when education technology companies were barred from making money. A corporate venture investor from the fashion sector said their group invests in India but not in China, drawn partly by a population that is 45% Gen Z. In textile-to-textile recycling, China had caught up and overtaken everyone in the past two years, so recycling companies the group backs are looking at joint ventures in India and Indonesia, drawn in India by grants for capex. A founder of an emissions-capture company had taken development out of China to control the IP risk.

A medtech investor asked how a Western company finds its way in. Mark pointed to launch pads such as C-CAMP, a life-sciences institute in Bangalore that hosts many foreign companies, to contract manufacturers, and to full-stack marketplaces that organise India's small manufacturers sector by sector. Warm introductions to a professional platform beat flying in to find a vendor at random.

Stopgap or strategy

India as a like-for-like replacement for China drew a flat no from one investor. A Chinese factory owner who climbed the value chain did what any entrepreneur would, and Indian suppliers will do the same. The West has to decide which capabilities it must keep. AI adds urgency, since it will hit call centres first, then software developers, then design engineers. India, the investor said, is "more of a stopgap opportunity than it is a long-term strategy".

Mark said it was both. At Indian business schools, about 95% of MBA students used to be engineers, and Mark once joked to them that it was good nobody wanted to build roads or sewers when they could sell soap. India put its best people into software at the expense of manufacturing. AI will be socially disruptive, Mark said, but it may push that talent back towards industry, infrastructure and defence.

A participant put the harder question. China's edge is its learning curves, built by throwing talent and money at problems amid fierce internal competition, and it no longer exports them. Apple's production in India is not going especially well. Mark called it a function of time. As an economics student in the mid-90s, Mark remembered people asking whether China could make anything more than chopsticks. India has only just started its automated manufacturing journey, and it already outperforms China in pharmaceuticals and fine chemicals. China's show of strength over rare earths will keep China-plus-one strategies alive. One of the hosts said synthetic biology and fermentation companies increasingly choose India for secure IP and room to scale, while conceding that solar is lost to China.

The emissions-capture founder was not convinced. Everyone in their sector still looks to China to cut hardware costs, and they had seen little heavy equipment from India. When Chinese solar makers anticipated tariffs, a participant noted, they moved to places they could control, such as Vietnam, and they cannot control India. Mark has a lot of faith in Indian education and Indian entrepreneurs, which is what a VC in India backs. It might not work, Mark said, but India is going to put up an interesting fight.

This Ripple was hosted by Divya Murthy (OysterBay) and Mark Kahn (Omnivore) at The Drop 2026 on 16 September.