Asia could not buck the global trend of venture capital pullback in 2022, as total funding for the year dropped 39% compared to the record-setting year of 2021.
Funding dropped from a high of $177.2 billion in 2021 to $108 billion last year, according to Crunchbase data.
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The drop isn’t suprising, as markets around the world have been rankled by inflation, geopolitical issues and never-ending supply chain problems stemming from the pandemic.
The final quarter of last year saw a significant drop from that of 2021. In Q4, $21.7 billion rolled to startups on the continent, a massive 58% drop from Q4 2021, which saw a record $51.7 billion invested.
However, Q4 actually saw a small uptick from the previous quarter, which saw $21.4 billion invested.
Deal flow also saw a huge drop, falling nearly in half from 2,455 funding rounds announced in Q4 2021 to only 1,246 in the last quarter. That also is a decline from 1,578 in Q3 of last year.
Late stage and growth plummets
The large year-to-year decline was set in motion by a big drop in late and growth funding. In 2021, $115.7 billion was invested in late-stage startups as valuations remained high and venture capital deals became extremely competitive.
Last year was a very different story, with only $56.5 billion being invested in later rounds, an astounding 51% drop.
While all rounds declined year to year, the drop in late and growth funding was a driving factor in venture being down from 2021 due to the large dollar amounts involved. The drop is not surprising, as later stage rounds — and the high valuations associated with them — were the first to feel the venture capital pullback earlier last year.
The fourth quarter actually saw a slight increase in such rounds from the previous quarter — at $10.4 billion from $9.4 billion. However, those numbers year to year saw a massive dip, falling 68% from the record-breaking high of $32.4 billion in Q4 2021.
Deal flow from Q4 2021 also was significantly down, falling from 359 to only 187 last quarter.
There were still large rounds in 2022, including:
- China-based GAC Aion New Energy Automobile, which has five different EVs in the market, raised a Series A worth approximately $2.5 billion in October.
- In April, Viacom18 Digital Ventures, a joint venture operation in India between Viacom and Network18, raised a $1.8 billion venture round.
- Also in April, China-based fast-fashion company Shein raised $1.5 billion in a new funding round, giving the company a valuation of $100 billion.
Seed rounds sprout multiple stories
Not every round saw a dip this year. Angel and seed round funding actually increased for the year. In 2021, angel and seed rounds totalled $6.1 billion. Last year actually saw a 24% increase to $7.6 billion.
Of course, the issue is seed funding is the smallest by dollars, so it was not able to move the needle much.
Angel and seed funding declined by quarter. In Q4 2021, such funding was $2.1 billion in a whopping 1,281 deals, compared to only $1.4 billion in 624 deals in the final quarter of last year — a 32% decline. Angel and seed even saw a decline from Q3 2022, when it hit $1.6 billion in 882 deals.
Early stage sees some softness
Compared to angel and seed, early-stage rounds stayed pretty stagnant quarter to quarter. In Q4 last year, $9.8 billion was invested in early-stage rounds in 435 deals, down only 6% from Q3 which saw $10.4 billion spent on 520 deals.
The final quarter of last year was a far cry from that of 2021, which saw $17.2 billion invested in 815 deals — 43% more than Q4 2022.
Year-to-year comparisons paint a similar picture. While 2022 saw $43.9 billion go to early-stage rounds, that represented a 21% drop from the $55.4 billion invested in such rounds in 2021.
However, it’s also important to remember that in 2020, early-stage rounds only saw $28.8 billion — more than a third less than last year.
What happened where?
With the big drop in venture funding, it comes as little surprise the region’s two largest countries were most affected.
China saw its venture dollars cut in half from 2021, falling from $88.5 billion to $44.2 billion in 2022. Last year’s number also is a drop from even 2020, when $56.4 billion of investment went to China startups.
India saw investment fall by about a third, dropping from $36.3 billion to $24.9 billion last year. Much like China, 2022’s number represents a drop even from 2020, which saw $33.8 billion of dealmaking.
Other countries that saw notable declines from 2021 include Japan — falling from $5.1 billion to $2.5 billion last year — and Indonesia — dropping from $8.7 billion to $4.3 billion last year.
Countries like Israel and Singapore held pretty consistent from 2021, only seeing slight dips, and the United Arab Emirates jumped from $1.7 billion in funding in 2021 to $2.7 billion last year.
What it means
Asia could not swim against the tide of venture capital being down globally after a record 2021.
Global tensions and a world still struggling to emerge from a pandemic stifled markets everywhere. Asia had to deal with the added issues of China — the driving engine of the region’s economy — and its crackdown on the technology sector, which likely continued to have a chilling effect on venture funding on the continent.
However, it is important to remember numbers were down only slightly from 2020, and 2021’s numbers are looking more like an aberration than the norm at this point.
There also have been signs toward year-end that Chinese regulators may be softening their stance toward internet companies.
Just this week it was reported Tencent Holdings-backed WeDoctor is expected to file for an IPO this spring as regulations loosen. Those signs could help keep the venture market robust in Asia for the new year.
Nevertheless, others see the economy likely entering a recession, with layoffs and global supply chain disruptions still dominating headlines.
If that does occur, venture numbers in 2023 may not be able to maintain even 2020 levels.
The data contained in this report comes directly from Crunchbase, and is based on reported data. Data reported is as of Jan. 4, 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
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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