Despite a slight recovery in the global enterprise capital funding market, Asia appears to be lagging behind.
The region saw its worst quarter for enterprise capital funding since the final quarter of 2015, with Asian startups raising just $14.6 billion, down 24% from the first quarter and down 32% year-on-year.
In addition, deal volume in the region continues to say no, with only one,511 financings announced in Q2. This figure represents a 15% decline in comparison with Q1 and a more pronounced 27% decline in comparison with Q2 last 12 months.
Late rounds proceed to fall
Of course, what really moves the needle are the late growth rounds. However, growth rounds in Asia totaled just $14.6 billion—the lowest quarterly total since 2019.
This figure represents a sharp 24% drop in comparison with the first quarter and an even sharper 32% drop in comparison with the second quarter of 2023.
Unlike other regions that have seen billions of dollars in fundraising, Asia has not been hit by the big money frenzy, although there have been a few deals value greater than half a billion dollars this quarter:
- Based in China HozonElectric vehicle startup raises $690 million in enterprise capital funding
- Indian grocery delivery startup Zepto raised $665 million, doubling its valuation to $3.6 billion.
- Based in China Unisociationa semiconductor company specializing in integrated circuits for mobile communications and the Internet of Things, has raised a round of financing value roughly $552 million.
Deal volume also fell, with just 134 late-round deals in Q2. That’s down 21% from Q1 and down 14% year-over-year.
Early financing suffers
While any significant decline in enterprise capital investment is almost at all times directly related to late-stage financing, there has also been a noticeable decline in early-stage deals.
Early-stage investment volume fell to only $4.9 billion — a staggering 53% drop from the first quarter and a 39% decline year-over-year.
Deal volume declined only barely, with 539 rounds announced in Q2. This figure represents declines of just 7% in comparison with Q1 and 16% in comparison with Q2 last 12 months.
The seeds do not germinate
To be honest, given the numbers above, seed and angel funding definitely won’t save the amount of enterprise capital funding in the region. While such rounds can generate interesting deals, they’re not big money.
Angel and seed investments rose barely each quarter-over-quarter and year-over-year, totaling $1.9 billion, up barely from $1.7 billion in the first quarter.
However, deal flow shrank to only 834 deals — down 19% from Q1 and down 34% from Q2 2023. In fact, this is the lowest variety of seed and angel deals in at least several years.
Decline by country
This region is dominated by one player: the Red Dragon.
That dragon didn’t breathe fire last quarter, as enterprise capital funding in China fell sharply. Venture capital funding in the country reached just $6.9 billion — down an impressive 46% from Q1 and 33% from Q2 2023.
India, by far the region’s second-largest enterprise market, saw $3.4 billion in funding, up 27% from Q1 but down 9% from Q2 last 12 months.
What does it mean
The contraction of the enterprise market over the past few quarters has been shocking. While everyone knew the 2021 peak couldn’t be sustained, it seemed inevitable that the decline in dollar volume would stop.
However, despite a temporary respite in the middle of last 12 months, the market is still heading in the other way and appears to be returning to where it was a decade ago.
Even AI — the latest craze among all the enterprise capitalists today — couldn’t save the Asian enterprise market. AI startups in the region have raised only about $2.5 billion, in line with Crunchbase dataThat’s peanuts in comparison with North American AI-focused startups that attracted $16.8 billion in Q2.
While some AI firms, corresponding to China’s Zhipu AI and South Korea 42dotsThey raised large sums of cash well in excess of nine figures, but there have been just too few of them.
Trade and investment tensions between China and the West, in addition to the region’s still struggling economy, are not helping.
China’s regulatory policies regarding equity investment and IPOs probably have not helped either, but there have been recent developments signs officials wanting to change this in order to stimulate the falling market. Recently reported that only $4.6 billion was raised in mainland Chinese IPOs in the first six months of the 12 months, down 85% in comparison with the first half of 2023.
Such actions will likely be needed if the region is to stave off recession.
Methodology
The data in this report comes directly from Crunchbase and is based on reported data. Reported data is as of July 7, 2024.
It is essential to do not forget that data lags are most noticeable in the earliest stages of a enterprise’s life, and seed funding amounts increase significantly after the end of the quarter/12 months.
Please note that every one funding values are reported in US dollars unless otherwise noted. Crunchbase converts foreign exchange to US dollars at the prevailing spot rate from the date that funding rounds, acquisitions, IPOs, and other financing events are reported. Even if these events are added to Crunchbase well after the event is announced, foreign currency transactions are converted at the historical spot price.
Glossary of financing terms
As of January 2023, we have made a change to how we account for corporate funding rounds in our reporting. Corporate rounds are only included if the company has raised seed equity funding through a series enterprise funding round.
Seed and angel consist of seed, pre-seed, and angel rounds. Crunchbase also includes undisclosed enterprise rounds, equity crowdfunding, and convertible bonds of $3 million (USD or USD equivalent after conversion) or less.
Early stage includes Series A and Series B rounds, in addition to other kinds of rounds. Crunchbase includes unspecified enterprise, corporate enterprise, and other rounds above $3 million and those lower than or equal to $15 million.
Late stage includes Series C, Series D, Series E and later enterprise rounds after “Series [Letter]” naming convention. Also included are enterprise rounds of unknown series, corporate ventures, and other rounds above $15 million.
Technology Development is a round of personal capital raised by a company that has previously raised funds in a enterprise round. (Basically any round from the previously defined stages.)