- Venture capital firms in China invested $26.7 billion in 3,072 deals in the first half of 2023, according to PitchBook.
- On an annual basis, this represents a 31.4% decline from 2022 levels – on track to fall below 2016 levels, the report said.
- In fundraising, PitchBook said it closed only three U.S. dollar-denominated funds in the first half of the year.
Chinese ride-hailing giant Didi was delisted from the New York Stock Exchange just months after its IPO in June 2021 after a now-closed regulatory investigation forced Didi to suspend new user registrations.
Brendan McDermid | Portal
BEIJING — Slowing growth and geopolitical tensions are stifling the Chinese startup world that once spawned unicorns like ByteDance and Didi, a PitchBook report said Monday.
China’s economic recovery from the pandemic has slowed. Tensions between the US and China have spilled over into the financial sector, dampening already subdued market sentiment. Chinese regulation has also made it harder for companies to go public abroad in the past two years.
Venture capital firms in China invested $26.7 billion in 3,072 deals in the first half of 2023, according to PitchBook.
On an annual basis, this represents a 31.4% decline from 2022 levels – on track to fall below 2016 levels, the report said.
Most investments were also small.
The annual value of mega deals — $100 million or more — is on track to reach its lowest level since 2015, PitchBook said.
While China’s economy has shown signs of recovery in recent weeks, the slowdown in early-stage investment is a significant rebound from which to recover.
According to PitchBook, the second quarter deals marked the fourth consecutive quarter in which deal value declined.
One factor was the decline in foreign participation.
In the niche world of early-stage investors that once thrived in China, companies had raised billions of dollars from foreign institutions to invest in domestic startups that would then go public in the United States
Anecdotally, we have heard that some US investors have withdrawn their investments in China primarily due to geopolitical concerns and several other factors…
PitchBook
A record low 10% of deals involved an investor based outside Greater China, down from about 16% in 2018, according to PitchBook. In terms of fundraising, the report said only three US dollar-denominated funds closed in the first half of the year.
“Anecdotally, we have heard that some U.S. investors have backed away from investing in China primarily due to geopolitical concerns and several other factors, including an economic slowdown in China and tough measures against the technology sector,” the report said.
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Growth in yuan-denominated funds and mid-cap funds helped boost total fundraising activity in Greater China to $28 billion – on track to surpass 2022 levels, but still a significant slowdown from 131 .4 billion in 2018, according to PitchBook.
Difficulties at the end of the venture capital investment process remained as market sentiment for IPOs in Hong Kong and the US remained subdued.
According to PitchBook, the number of exits in the first half of the year fell to 130 from 177 in the second half of 2022, while the exit value fell from $100.2 billion to $77.5 billion.