Asia venture funding sank to its lowest level in 10 quarters as the region felt the full effects of the ongoing private market pullback.
Mirroring what is happening in the public markets, investors cut funding to private companies with only $21.2 billion going to startups in the region. That’s a 26% decrease from the second quarter and a staggering 56% from the third quarter of last year.
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As with the global numbers, the total funding amount marked the lowest investment since the first quarter of 2021, when the world was entering a pandemic and startups in the region only raised $19.6 billion.
Not surprisingly, deal flow also suffered, hitting its lowest level since Q4 2020. Only 1,417 deals were announced in Q3, down 18% from last quarter and down 22% from a quarter ago. year.
Late stage leads downhill
While all types of rounds were down from last quarter, the biggest drop was seen in late-stage and tech growth rounds. That trend isn’t unique to Asia, but it was certainly pronounced.
Large late-stage and growth rounds fell 42% from last quarter to $9.2 billion. That number also represents a 71% drop from the third quarter of last year, when the total hit $32.2 billion.
Although there were some big deals, like the Singapore-based online shopping company Lazada Group closing a round of $912.5 million of alibaba—the flow of transactions also fell. Deal flow fell nearly a third from a year ago in the quarter with just 168 late-stage and tech growth rounds closed in the third quarter. That’s also an 18% decrease from last quarter.
The drop in late-stage deals meant that early-stage funding rounds actually saw more investment in the third quarter with $10.4 billion raised. However, that doesn’t mean things were entirely positive for seed funding.
Early-stage deals fell 28% from the third quarter of last year to $10.4 billion. That was just a 3% drop from the previous quarter, but well below the recent high of $17.2 billion in seed rounds that we saw in the fourth quarter of last year.
Early-stage deal flow took a significant hit from last quarter, falling 22% to 497. That’s also a 16% drop from Q3 2021.
Uneven seed stage
Seed and angel rounds took a hit from last quarter, falling 23% to $1.6 billion, though that number is actually 13% higher than the same quarter last year. While that may be a good sign, the amounts for such rounds are so small that they don’t really move the needle for overall funding in the region.
However, deal flow was down both from last quarter and year-over-year. Just over 750 seed and angel deals were announced in the third quarter, a drop of 14% from last quarter and 23% from last year. It is also a far cry from the 1,174 deals announced in the fourth quarter of 2021.
So which countries in the region led to these numbers?
While almost every major country saw their numbers drop, India had one of the steepest drops. Startups in the country raised just $2.9 billion in the third quarter, compared to $8.5 billion last quarter and $15.4 billion in the third quarter of 2021.
Last year was a standout year for indian startupsbut this year tells a very different story.
China’s numbers also dropped significantly from quarter to quarter. Chinese startups only saw $9.6 billion invested in the latest quarter, compared to $18.5 billion in the same quarter of 2021. The figure is also down from the $9.8 billion invested in the second quarter and a dramatic drop from record high. of $27.9 billion that investors poured into startups in the fourth quarter of 2021.
With unstable public markets almost everywhere, Asia also did not see a robust IPO market. The largest IPOs in the region involving VC-backed startups included two in the shanghai stock exchange:
- China-based healthcare solution provider MGI technology raised approximately $506 million in a September initial public offering.
- China-based biotech company InventisBio raised nearly $293 million in a July initial public offering.
M&A trading also declined, with only about 60 deals involving venture capital-backed startups announced, a decline of about 25% from last quarter. The largest deals announced in the third quarter in Asia were:
What else is there to say really?
Business financing and growth, especially late-stage growth, have declined almost everywhere. Tension between China and the US and Europe probably didn’t help fund the numbers in the region, nor did continued Chinese regulation boost tech companies.
Mix public market turmoil and general economic pessimism, and you have a bear market. globallyas well as in North AmericaEurope and certainly Asia.
It’s strange that India’s figures fell so far, considering that some signs indicate that it has weathered the global economy down well overall. However, perhaps the company’s numbers show that that is changing.
Last year saw a record of more than $175 billion invested in startups in the region. That robust market appears to be much further away than it was just nine months ago.
The data contained in this report comes directly from Crunchbase and is based on reported data. The reported data is as of October 3, 2022.
Note that data lags are more pronounced in the early stages of company activity, with seed funding amounts increasing significantly after the end of a quarter/year.
Please note that all financing values are in US dollars unless otherwise stated. Crunchbase converts foreign currencies to US dollars at the prevailing spot rate as of the date financing rounds, acquisitions, initial public offerings 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 to the historical spot price.
Glossary of financing 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 USD equivalent based on conversion) or less.
The initial stage consists of Series A and Series B rounds, as well as other types of rounds. Crunchbase includes unknown series venture rounds, corporate venture and other rounds greater than $3 million, and those less than or equal to $15 million.
The late stage consists of Series C, Series D, Series E, and the later lettered risk rounds that follow “Series [Letter]denomination agreement. Risk rounds of unknown series, corporate risk and other rounds of more than $15 million are also included.
The tech growth is a private equity round raised by a company that previously raised a “venture” round. (Basically any round of the stages defined above.)
Illustration: Dom Guzman
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