Asia Venture Funding Hits 10-Year Low in Q3

Venture funding in Asia continues to decline – hitting the lowest total in nearly a decade in the last quarter.

Total venture dollars for startups in Asia fell to $13.2 billion — the lowest total since reaching $13 billion in Q1 2015 — according to Crunchbase data.

The number also represents a 13% drop from Q2 and a massive 44% drop from last year, when the total hit $23.8 billion.

Deal flow also continued to decline, with just 1,509 deals announced in Q3, down 8% from Q2 and down 23% from last year.

Even the AI ​​craze couldn’t save the venture numbers for Q3, as AI-related startups in Asia raised just $2.1 billion, down 20% from Q2 and the same as last year.

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The late stage rounds are struggling

The biggest culprit in Asia’s decline in venture capital fortunes remains late-stage growth rounds. Such rounds totaled just $5.8 billion, down 30% from Q2 and down 62% from the $15.3 billion raised by late-stage startups last year.

The number also represents the lowest total for early-stage funding in Asia since before 2015.

The big rounds were few and far between, but included:

• China-based AI startup Baichuan Intelligence has raised a $390 million Series A round.
• Chinese automotive-grade chip maker XLMEC has raised a round of nearly $344 million.
• India-based e-grocery startup Zepto has raised a $340 million Series G round.
• Chinese artificial intelligence firm Moonshot AI has raised a $300 million round.

Deal flow remained in line with Q2 with 139 rounds announced, but this was a 17% drop from Q3 last year.

Incipient stagnation

The good early-stage numbers don’t make up for the collapse of the late-stage rounds, and Asia’s numbers here were even less than good from a VC perspective.

The numbers have dropped – but not as dramatically as in the late stage. Early-stage startups raised $5.6 billion last quarter — up 12 percent from Q2, but down 17 percent from the $6.8 billion raised last year.

Deal flow was relatively stagnant in Q2 as 508 deals were completed. However, this was down 22% from the same quarter last year.

Mixed seeds

Seed and angel rounds were down 9% from Q2 to $1.8 billion. That number is actually a 6% incremental increase from a year ago, when angel and seed rounds totaled just $1.7 billion.

However, transaction volume fell significantly for the quarter. Only 862 angel and seed rounds were closed in Q3, down 10% from Q2 and down 25% from last year when 1,152 such rounds were announced.

The breakdown of the country

Unsurprisingly, China’s long risk slide is one of the main culprits for Asia’s funding fortunes. Chinese startups raised just $6 billion in Q3, down a modest 19% from Q2, but down a staggering 61% from Q3 last year.

Israeli startups have similarly struggled, raising just $700 million — down 23% from Q2 and 6% from last year — as conflict continues in the region.

The only bright spot on the Asian risk front may be Japan. Japanese startups raised $1.3 billion, a staggering 95% increase from Q2 and 58% from last year. This included a nearly $133 million Series E for HR startup SmartHR.

What does this mean

While it’s important to remember that Asia isn’t the only market to see a decline in venture funding – global venture funding in the third quarter fell 16% quarter-on-quarter and 15% year-on-year – its decline from last year was much more significant.

One of the reasons clearly seems to be AI. Globally, AI startups reached nearly $19 billion, or 28% of all venture dollars in the third quarter.

However, Asia’s AI venture market appears to be lagging behind, with AI-related companies accounting for just 16% of that region’s startup funding in Q3 and just 17% in Q2.

While funding for AI startups seems to cover more problems in the global venture market, Asia is not receiving the same benefit.

Methodology

The data contained in this report comes directly from Crunchbase and is based on reported data. Data reported is as of October 2, 2024.

Note that data lags are most pronounced in the early stages of venture activity, with seed funding amounts increasing significantly after the end of a quarter/year.

Please note that all funding amounts are in US dollars unless otherwise noted. Crunchbase converts foreign currencies into US dollars at the prevailing spot rate as of the date financing rounds, acquisitions, IPOs and other financial events are reported. Even if those events were added to Crunchbase long after the event was announced, currency transactions are converted to the historical spot price.

Glossary of financing terms

We’ve made a change to the way we include corporate funding rounds in our reporting starting in January 2023. Corporate rounds are only included if a company raised equity funding early on through a venture capital round.

Seed and Angel consists of seed, pre-seed and angel rounds. Crunchbase also includes venture rounds of unknown series, equity funds, and convertible notes at $3 million (USD or converted USD equivalent) or less.

The early stage consists of Series A and Series B rounds as well as other types of rounds. Crunchbase includes venture rounds from unknown series, corporate ventures and other rounds above $3 million and less than or equal to $15 million.

The late stage consists of Series C, Series D, Series E and subsequent lettered venture rounds, which follow “Series [Letter]” naming convention. Also included are venture rounds from unknown series, corporate ventures, and other rounds above $15 million.

A tech seed is a private equity round raised by a company that previously raised a “venture” round. (So ​​basically any round in the previously defined stages.)

Illustration: Dom Guzman