Asia May Soon Eclipse U.S. as World's Biggest VC Market

Asia May Soon Eclipse U.S. as World's Biggest VC Market

Women check their mobile phones at a market on Jan. 19, 2016, in Beijing, China.

SourceKevin Frayer/Getty

Why you should care

Because demand for tech groups is driving billions in startup cash to the region.

Asia is closing in on the U.S. as the biggest home for venture capital, with total funding of $70.8 billion last year to America’s $71.9 billion, according to the latest PwC/CB Insights MoneyTree Report.

Global VC funding increased nearly 50 percent year on year to more than $164 billion invested across 11,042 deals, according to the survey. In Asia, funding more than doubled while in the U.S., it rose 17 percent year on year but deal volume fell to 5,052, the lowest level since 2012.

Europe remained the world’s laggard, despite a 40 percent rise in financing to $17.6 billion across 2,483 deals.

China is proving a magnet for capital, with money pouring into everything from ride-hailing apps and shared bikes to artificial intelligence and car-charging stations.

Didi Chuxing late last month announced a $4 billion investment … [It] valued the ride-hailing group at $56 billion, making it the world’s biggest unicorn behind U.S. rival Uber.

Didi Chuxing late last month announced a $4 billion investment from a consortium that included Japan’s SoftBank and Abu Dhabi state fund Mubadala Capital, as well as domestic investors. That investment valued the ride-hailing group at $56 billion, making it the world’s biggest unicorn behind U.S. rival Uber.

Other top-ranked Chinese unicorns, including Meituan-Dianping — an app that enables users to book and buy meals, manicures and many other services — raised $4 billion late last year for a valuation of $30 billion.

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Smartphone apps from the ride-hailing giants, Uber and Didi Chuxing.

Source Zhang Peng/Getty

Abundant funding has helped fund cutthroat business practices, including costly subsidies, which precipitated Uber’s retreat from China, throwing its lot in with Didi. Meituan last week marked its own entry into ride-hailing.

Some onetime startups such as handset maker Xiaomi are now eyeing the public markets, where liquidity is also abundant and tech companies in particular, including China’s tech titans Tencent and Alibaba, are seeing their prices propelled higher.

The duo are also big investors in startups in China and Asia, with Tencent in particular outspending traditional VC companies.

Corporations, including their VC arms, were involved in more than a third of last year’s deals in Asia.

Artificial intelligence attracted increasing financing — up to $5 billion in the U.S. last year — while $2.5 billion went into genomics in the U.S.

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By Louise Lucas

OZY partners with the U.K.'s Financial Times to bring you premium analysis and features. © The Financial Times Limited 2018.

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