After frenetic start, china’s vc ecosystem cools in late 2018

China represented more than 60 percent of the total venture dollar and deal volume in the region in Q4 2018, according to Crunchbase data. That made it heavily influential in shaping the data above. For example, known deal and dollar volume in Southeast Asia (which doesn’t include China) increased over the quarterly periods detailed above, including a massive $1.2 billion deal for Indonesia-based Go-Jek spiking the region’s Q4 total to around $4.1 billion.

Late stage deals represented the remaining 12 percent of deal volume and a staggering 64 percent of dollar volume for deals of known type and size.

The average late-stage round totaled about $167 million. That represents a slight increase over Q3 2018’s $140 million average, and a decrease of nearly 30 percent from Q2 2018’s high of $217 million if the Ant Financial round is taken out of consideration.

Keeping a tally of the number of supergiant rounds, Crunchbase recorded 39 of more than $100 million rounds in Q4 2018. In both Q2 and Q3 2018, 56 rounds of over $100 million were recorded, while China made off with 38 supergiant rounds in Q1 2018, and 39 in Q4 2017. Here, again, we see a peak in the middle of 2018, and a slope down to the year’s end.

A government-encouraged push for entrepreneurship and startup growth led to a surge in the interest of banks and other state-owned institutions in playing a hand in the venture scene in recent years. But, as Nikkei Asian Review and others have reported, that encouragement brought a spike in fundraising for possibly inexperienced venture fund directors.

If there’s a smaller pot of gold and anticipation that returns through a public exit will be less lucrative, that means that supergiant rounds like those mentioned above will likely be less common. And in an atmosphere that has been referred to as a funding winter, consolidation of industries may continue. This is particularly the case for those in the electric vehicle industry, where government subsidies that have warmed investor and entrepreneurial interest have started to scale back.

And if the stock market in China keeps significant pressure on China’s big tech market caps, it could be the case that now-infamous large corporate investments by players like Baidu, Alibaba, and Tencent in startups in China become less common. Tina Cheng, managing partner at Beijing-based Cherubic Ventures, told Crunchbase News that she believes revenue interests may occupy corporate attention.

That slowing economic condition could also mean that the companies may scale back from pursuing global growth through investment in startups in emerging economies in Southeast Asia and India. However, Vishal Harnal, general partner at 500 Startups in Singapore, told Crunchbase News that while VCs are scaling back in China, he believes fluctuations in venture capital funding in emerging markets like Southeast Asia will likely be short-lived.

“More capital is being reallocated out of traditional asset classes into alternatives, and within alternatives, from hedge funds into [private equity] and VC,” Harnal explained in an email. “In Southeast Asia, most family office wealth is significantly over-allocated stocks, bonds, and real estate, but that is quickly changing as they familiarize themselves with VC as an asset class and increase their exposure.”

China has helped lead the world of tech and VC in 2018 that brought major venture capital gains, but a slowing economy, ongoing trade tensions, and stumbling global markets foreshadow a less optimistic future. China’s government has a history of addressing domestic issues with precipitous policies that have engendered long-term repercussions. If the country is challenged by a recession, we’ll have to see if “capitalism with Chinese characteristics” will (once again) keep its economy afloat, or whether the venture community and the country’s 2025 goals will drown with it. Methodology Notes

Companies considered in this section only include those that have listed geographical locations on Crunchbase. Companies in the Asia-Pacific include Mainland China, Hong Kong, Macao, Taiwan, South Korea, North Korea, Japan, Mongolia, Philippines, Indonesia, Myanmar, Laos, Thailand, Cambodia, Singapore, Malaysia, Vietnam, Australia, New Zealand, Bhutan, Bangladesh, British Indian Ocean Territory, Indonesia, Maldives, India, Nepal, Pakistan, and Sri Lanka.