Chinese Startups Lead US Rivals In 2018 Venture Race

Private technology companies in China have led their U.S. counterparts in venture capital fundraising throughout the surpassing majority of 2018.

Follow Crunchbase News on Twitter

Aggregated venture funding data from Crunchbase, current as of this morning, suggests that Chinese startups raised more venture capital than American startups to date in 2018. This is a slightly different, more precise follow-up to prior work by us and others that documents China’s ascendent position in the global venture market.

The graphic below shows how much American and Chinese startups raised from VCs, relative to the rest of the world, in 2018 to date.1

At roughly $2.2 billion, the gap in funding is nonetheless notable.

Much of the difference is attributable to just a few supergiant venture rounds of $100 million or more. It’s a phenomenon Crunchbase News has covered in depth, and it’s a trend that’s still very much at play in recent months. This includes hypergiant $1 billion venture rounds raised by Sensetime (based in Beijing) and Singapore-based Grab, as well as rounds raised by Letgo (U.S.), Souche (China), Peloton (U.S.), and many others that were at or above $500 million.

In the context of rounds of that scale, a $2.2 billion gap in funding doesn’t seem like much. Just a few big rounds here or there could tip the balance in a big way. Indeed, the current $2.2 billion difference is much narrower than at other times of the year.

But the change from a U.S.-led startup ecosystem to one that China drives is a notable shift. Doubly so if China holds the crown through the year’s end.

How We Got Here

The raw dollar figures, however, aren’t the full story.

The chart below shows a running total of venture funding raised by startups in China, the United States, and the rest of the world through 2018. Note that this chart is also subject to some reporting delays; we’ve also excluded private equity rounds as well.

For all but a few weeks at the beginning of the year, and one brief period at the start of June, Crunchbase data indicates that Chinese startups, collectively, have been more prodigious fundraisers than their U.S. counterparts.

That big June jump in China funding is the $14 billion (yes, with a “b”) Series C round raised by Hangzhou, China-based Ant Financial in Week 23 of the year. That round was co-led by Temasek Holdings and GIC, both investment companies owned by the Singaporean government. It remains the largest-ever VC deal closed to date.

In almost all respects, the gap between U.S. and Chinese venture funding doesn’t really matter. Many of the top-funded private companies in each country aren’t directly competing for each other’s markets. And many American investors and entrepreneurs view international adoption of the U.S. model of venture capital in a positive light.

But if there is a torch to pass, it’s an interesting moment in which to hand it over. China isn’t skating past the U.S. when the latter is down. The U.S. venture market is incredibly strong at the moment.

But questions remain. Which ecosystem is more overheated? Will Chinese government intervention and rule-making disrupt its domestic technology market? And can Chinese-headquartered companies win outside of their own borders? Those questions, and more, will determine which market keeps the crown long-term.

China today, however, is taking a shot at the king. And, as our chart shows, it isn’t missing.

Illustration: Li-Anne Dias