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Asian Venture Looking To Bounce Back After Slight 2-Year Slowdown

Even with a persisting pandemic, investment in Asian startups is off to its best first half start in three years.

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Although not the dramatic increases in funding seen in some other parts of the world — most notably Europe which saw a jump of 215 percent over the first half of 2020 — the numbers show more money is going into fewer deals with some of the most prominent U.S.-based venture investors — or their Asia-based affiliates — leading the way.

Table of Contents

  • In the recently completed first half of the year, startups in Asia saw $61.9 billion in funding, the most in any half year since the first half 2018 when companies raised $79.8 billion, Crunchbase figures show. That dollar amount represents an 11 percent increase from the second half of last year and a 15 percent rise from the first six months of 2020.

    Funding at most stages was up year to year — with the exception being technology growth, or private equity funding, slightly declining.

    Early-stage funding makes gains

    Early-stage funding to startups in Asia made the biggest gains in the first half, realizing a nearly 31 percent year-to-year increase from $13.8 billion to $18 billion, per Crunchbase data. That also represents a 58.3 percent increase from the last half of 2020 which saw a total of $11.4 billion.

    Abheek Anand, managing director for Sequoia India and Southeast Asia, said one trend related to early-stage funding he has noticed recently in the region is the speed at which companies in the area are raising new rounds. Companies are no longer taking a year or so to move from seed to a Series A, but accelerating the process.

    “Companies are going from seed to Series B in a year,” he said. “It’s moving very fast.”

    Although the first half of the year proved strong overall, the second quarter did show some signs of slowing down with only $7.8 billion in early-stage investment — down more than a half billion from last year and $2.4 billion from the first quarter.

    While dollars were up for early-stage rounds, deal flow slowed year over year when compared even to the latter half of 2020 — an overall trend in Asia funding. The first half of the year saw 764 early-stage rounds, down 24.8 percent from last year’s first half, although up nearly 13 percent from the second half of 2020.

    Overall, Crunchbase data shows funding deals totaled 2,339, down 2.4 percent from the second half of last year and down 21.3 percent compared to the first half of 2020, which saw 3,022 deals. When compared to the first half of last year, early-stage funding to startups in Asia dropped 24.8 percent and angel and seed rounds dropped 24.2 percent.

    Late-stage and technology growth

    Along with year-over-year growth, late-stage and technology growth rounds saw the most dollars roll in. Those late-stage growth rounds — from both venture capital and private equity — totaled $42.3 billion in the first half of this year, up 9.5 percent from the same half last year.

    However, similar to early-stage funding, the second quarter came in lower than the same quarter last year — $22.6 billion vs. $26.3 billion.

    Some of the most notable rounds in the second quarter included a $2 billion private equity investment in J&T Express in Indonesia, and a $1.9 billion corporate round for China Post Life Insurance.

    Food delivery services saw the most big venture rounds of the quarter, with China-based Dingdong Maicai — a fresh vegetable e-commerce platform that went public in June — receiving a $1 billion-plus Series D, and India-based restaurant delivery service Swiggy taking in an $800 million Series J led by the SoftBank Vision Fund.

    China leads the way

    Not surprisingly, China led all countries on the continent in investment with $31 billion in funding — a slight uptick of about 5 percent from the second half of last year and an increase of more than 40 percent from the first half of 2020.

    India saw the second-most investment — however, significantly down from last year. The country — which has been ravaged by COVID-19 — took in $10.4 billion in the first half, down nearly 26 percent from the second half and more than 47 percent from the first half of last year, per Crunchbase figures.

    Israel, Indonesia, Singapore, Japan, Hong Kong and South Korea all saw more than $1 billion of funding come to startups there in the first six months of the year.

    IPOs

    Asia also saw a significant number of IPOs, with nearly 50 companies going to the public market in the first half, with China again leading the way.

    The most watched IPO was ride-hailing giant Didi, which went public to much fanfare on June 30 and raised $4.4 billion. But two days later, the Cyberspace Administration of China announced it was launching an investigation of the company on suspicion it had violated data privacy and national security laws and shares plummeted 25 percent after the July 4 holiday.

    The issues may have wide-sweeping implications, as China may initiate new rules for overseas listings and tighter supervision of how data moves across its borders. These changes could affect foreign private investment that comes into the country.

    However, the largest IPO in Asia in the first half of the year was from China-based Kuaishou Technology, which raised $5.4 billion through its February premiere on the Stock Exchange of Hong Kong.

    The only other two Asian offerings raising more than $1.5 billion were South Korea-based Coupang’s IPO in March  — raising $4.6 billion — on the New York Stock Exchange and China-based JD Logistics — which raised $3.2 billion on the Stock Exchange of Hong Kong.

    When it comes to looking at the public markets, Anand said he is noticing companies are having more of a long-range vision for themselves and building to reach an IPO as the Asian market itself continues to mature. Instead of celebrating large funding rounds, Anand said they are now “celebrating the right things” such as building a company that can endure.

    “You are that more and more in companies,” he said. “Companies want to go public.”

    Investors

    Several firms with ties to the U.S. remained busy in Asia through the first half of the year.

    Sequoia Capital China led or co-led 20 rounds while taking part in 30 total. Qiming Venture Partners led or co-led the most rounds at 22, partaking in 32 rounds total. And GGV Capital, Sequoia India, Matrix Partners China and Tiger Global all took part in 25 or more rounds in Asia in the first half.

    Acquisitions

    Nearly 130 venture-backed companies in Asia saw an exit through M&A in the first half of the year by both private equity firms and strategic buyers. While most were not headline grabbing, some notables deals include:

    What’s next?

    Overall, the first half of the year has set the table for 2021 to be the best year for funding in Asia since 2018 — although it does not seem like it will come close to the nearly $150 billion the continent saw that year.

    The numbers also don’t seem to indicate the strength of funding being witnessed in other parts of the world such as North America and Europe.

    There seemed to be a slight softening in some of the second quarter numbers as compared to the first, something that will bear watching as an unpredictable pandemic still rages across much of the continent.

    It also is worth keeping an eye on what China will do going forward with companies that use a “variable interest entity” — or VIE — model to go public overseas and if that affects future funding in Asia’s biggest country from foreign interests. Influencing a company’s potential exit and investors’ path to liquidity could well alter future investment in the country.

    Methodology

    The data contained in this report comes directly from Crunchbase, and is based on reported data. Data reported is as of July 6, 2021.

    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.

    The most recent quarter/year will increase over time relative to previous quarters. For funding counts, we notice a strong data lag, especially at the seed and early stages, by as much as 30 percent to 40 percent a year out.

    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.

    For M&A transaction analysis, we include venture-backed companies and exclude companies that previously went public.

    Glossary of funding terms

    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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