Venture funding in Asia got off to a brutal start in 2023, declining 33% from the previous quarter and a massive 57% from the first quarter of last year.
Total venture funding in the region fell to $15.2 billion — the lowest in at least the past three years, Crunchbase data shows. A year ago, first-quarter funding in Asia hit $35.5 billion and was $22.4 billion in Q4 2022.
Just as dollar figures plummeted, so did deal flow. The first quarter saw only 1,358 funding deals, a 5% drop from Q4, and a huge 42% dip from a year ago when 2,329 deals were announced.
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Late stage and growth declines again
The biggest drop among all rounds year to year was in late-stage and growth rounds — both in terms of dollars and percentage.
Late-stage and growth rounds only saw $7 billion in investment — a 64% drop from Q1 2022, which saw $19.7 billion, Crunchbase data shows.
Those big rounds also declined quarter to quarter, dropping 29% from the $9.9 billion Q4 of last year realized.
The numbers of those big late rounds also dipped to 148 announced deals — dropping almost 50% from the 289 deals in Q1 2022 and 29% from Q4.
The drop is not unexpected. When investors started to pull back in the market early last year, late-stage growth rounds were the first affected, as VCs shied away from the high valuations.
It also is very likely that these late rounds will be the last to come back when the market strengthens again.
Despite the drop, the first quarter did see some large, noteworthy rounds:
Early stage continues to soften
Early-stage rounds did not fare much better last quarter in terms of dollars. The first quarter saw $6.7 billion invested in 487 deals — the lowest dollar figure since Q3 2020.
The numbers also represent a steep decline from recent quarters, including a 50% drop from the $13.4 billion early-stage rounds raised in Q1 2022 and a 38% fall from the $10.8 billion such rounds saw in Q4 2022.
Early-stage deal flow, however, was pretty stagnant from Q4 2022 — meaning those early rounds in the last quarter were less valuable than early-stage Q4 rounds.
Seed and angel rounds weaken
While seed and angel rounds will not move the needle much in dollar amounts, even those extremely early rounds were down both quarter to quarter and year to year.
The first quarter this year saw only $1.4 billion raised in 723 rounds. That is a 41% drop from the $2.4 billion raised in Q1 2022 and a 30% decline in deal flow from that quarter.
Those first-quarter numbers also represent a 23% fall in total dollar amount from Q4 2022 and is the lowest dollar amount since Q2 2021.
What happened where?
No surprisingly, the biggest decrease in terms of dollars occurred in the region’s largest venture markets: China and India.
China saw venture funding drop to $8.1 billion — essentially, a 38% drop both year to year and quarter to quarter.
India, on the other hand, saw its venture funding drop 75% from first-quarter 2022. The country saw only $2.4 billion in venture dollars, down from $9.8 billion in Q1 2022 and down nearly 25% from $3.2 billion in Q4.
Other countries that saw notable declines year to year include Japan, Hong Kong and South Korea.
Israel, a tech hub in the region known for fintech and cybersecurity, saw a massive 65% drop from Q1 2022, drawing only about $1 billion in Q1 of this year.
What it means
Asia’s venture market is not as mature as North America’s, so it is unlikely the region would lead any type of recovery.
Add into that the fact tensions between the U.S. and China are at an all-time high — especially as China becomes closer with Russia after the invasion of Ukraine — and the region’s largest country still seems to be struggling to emerge from the pandemic, and it is not shocking Asia’s private market is reeling.
There also is political upheaval in Israel, which is unlikely to create more investor confidence.
That said, there have been positive signs for the economy in the region of late. Alibaba’s announcement of its split up and likely public float of its units seemed to please investors — as many saw it as a sign that the Chinese government could be relaxing its scrutiny of the technology sector that began in 2020 and erased more than a combined $1 trillion from the country’s largest companies.
Other Chinese companies such as JD.com also have shown interest in possibly going public.
If the Chinese tech market picks up — and foreign investors flock back — the region’s numbers could start to go in the other direction.
However, that is no sure thing.
The data contained in this report comes directly from Crunchbase, and is based on reported data. Data reported is as of April 3, 2023.
Note that data lags are most pronounced at the earliest stages of venture activity, with seed funding amounts increasing significantly after the end of a quarter/year.
Please note that all funding values are given in U.S. dollars unless otherwise noted. Crunchbase converts foreign currencies to U.S. dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs and other financial events are reported. Even if those events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historic spot price.
Glossary of funding terms
We have made a change to how we include corporate funding rounds in our reporting as of January 2023. Corporate rounds are only included if a company has raised an equity funding at seed through a venture series funding round.
Seed and angel consists of seed, pre-seed and angel rounds. Crunchbase also includes venture rounds of unknown series, equity crowdfunding and convertible notes at $3 million (USD or as-converted USD equivalent) or less.
Early stage consists of Series A and Series B rounds, as well as other round types. Crunchbase includes venture rounds of unknown series, corporate venture and other rounds above $3 million, and those less than or equal to $15 million.
Late stage consists of Series C, Series D, Series E and later-lettered venture rounds following the “Series [Letter]” naming convention. Also included are venture rounds of unknown series, corporate venture and other rounds above $15 million.
Technology growth is a private-equity round raised by a company that has previously raised a “venture” round. (So basically, any round from the previously defined stages.)
Illustration: Dom Guzman
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