China’s five-year venture capital funding party is over, but it remains to be seen whether they’ll be a hangover
Yesterday’s Bloomberg story quoting new figures from UK market research firm Preqin, tells a similar story to those we’ve been reading during the past week. The stats show the same downward trend for venture capital activity in China, with the value of venture deals during the second quarter of 2019 falling far short of Q2 2018.
According to Preqin, VC investments in China dropped by 77% in the second quarter compared with last year’s figures, registering $9.4 billion. The firm also reported that the number of deals had halved to 692.
However, the first half of 2018 was extraordinary, by all accounts. Last year’s second quarter investment deals in China reached an all time high of $41.3 billion (including a $14 billion round for digital payments giant Ant Financial). Was that really ever likely to be repeated? (and, of course, that’s very easy to say with hindsight!)
China’s five-year long venture capital boom started in 2014, the same year as Alibaba Group made history with the world’s largest-ever initial public offering. VC investments in China then saw phenomenal growth until mid-2018, after which both deal flow and capital invested has continued to slide.
China’s AI industry remains positive, but they’re not oblivious to the effects of the US-China trade war, APAC and global economic uncertainty, and growth slowing in the home market (Moody’s Investors Service expects China’s GDP growth to slow from 6.6% in 2018 to 6.2% in 2018).
Many industry execs and analysts alike do see investment activity in China adjusting to a ‘new normal’, with amply opportunity for promising startups. However — equally — they agree that the five-year fundraising party is over.
A version of this article was originally published by Carrington Malin in Asia AI News daily email newsletter on 9 July 2019.