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Asia Venture Capital

China Sees Slowdown in Venture Capital

Venture capital funding of startups in China has fallen to the lowest level since 2015, Bloomberg reports citing data from Preqin. In the last quarter of 2018, there were 713 deals with a total value of $18.3 billion. In the last three months of the year earlier, there were 951 deals worth $21 billion. 

The slowdown comes amid signs of a softening domestic economy sparked by government efforts to curb debt and a U.S.-China trade war that has had a disproportionately big impact on China’s export businesses, which are predominantly privately owned.

Preqin’s data focuses on foreign or Chinese venture capitalists who are investing dollars, and largely excludes the huge local investing scene that invests in yuan, the local currency. China’s strict currency controls mean that investment funds are separated into dollars or yuan. Anecdotally, local currency investors have been even harder hit, because they are more sensitive to the plunging domestic stock market.

The slowdown in investment could mean an end to the frothy subsidy wars of the past that fed the wasteful battles of ride rental startups. Some investors see the slowdown as a good thing. Valuations could drop, while founders may have to be more fiscally disciplined. And a worsening economy could actually help online businesses because they can provide cheaper services than traditional  brick-and-mortar competitors, some investors believe. 

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