Tech start-up funds plummet in China as easy money dries up
August 14, 2018 Category China News Round-up, Weekly
The funding deluge that fueled one of the world’s fastest technology booms may be ebbing. Capital raised by investment firms intended for seed and early funding – before a start-up seals its first round of financing – plunged 53% to just CNY3.82 billion in the first half, according to a survey of 36 funds by Chinese researcher Zero2IPO. More than 200 domestic venture capital firms saw money available for investment slide 44%, according to a second poll.
The declines suggest start-up investment may begin to wane in the months ahead. China’s clampdown on credit, coupled with a brewing global trade war and turbulence in markets, is hampering the venture industry’s ability to amass new capital. Zero2IPO’s numbers underscore a rapid fall in early-stage funding, a more severe hit to fledgling players rather than the well-established internet giants that still attract deep-pocketed backers such as Tencent and Alibaba. Overall investment – encompassing later stages of funding for bigger start-ups – rose 15% to about CNY117 billion in 2018’s first half.
“Due to caution about financial risks and the overall macro-economy, fundraising and exits have both not been doing well,” Zero2IPO Analyst Ma Rui said in a report. “Investment activity is expected to drop in the future, but for institutions that don’t lack money, the next six months to one year is a prime time to make bargain investments.” The total raised by 234 Chinese VC houses that Zero2IPO surveyed slid 44% in the six months ended June to CNY79.5 billion, the lowest level since they amassed CNY50.5 billion in the second half of 2014. Exits – initial public offerings (IPOs) or an outright sale – have similarly plummeted, suggesting valuations may be on the wane and discouraging deal-making. They fell 65% to 271, with about 40% done via IPOs.
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