Why Asia's Venture Capital Funding Nosedived in Q1

A report marks a signification drop in global funding by 22 per cent to $52 billion, while deal activity fell by 5 per cent to 3,327 transactions

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Asia has recorded a steep decline of 12 per cent in the first quarter of venture capital (VC) funding, to the Q4 of previous year. A 2019 CB Insights and PwC report on Venture Capital Fund has identified a fall of 7 per cent in the volume of deals, which is the second-straight quarterly decrease.

According to the report, Asia-based privately-owned companies just raised US$18 billion in Q1 in the recorded 1,128 deal transactions. It also noted a slight decline of corporate participation in VC deals as earlier it was 62 per cent, and now it came down to 60 per cent.

The report covered funding of private companies only and includes the investment made in the quarter for trenched investments. It also reflected the amount closed in a certain round and not the desired funding amount.

Global Decline

Asia is not the only continent that is facing a decrease in venture capital funding. The report has called for a global action on the declining rate of transactions in VC fund landscape.

The report marks a signification drop in global funding by 22 per cent to $52 billion, while deal activity fell by 5 per cent to 3,327 transactions.

In North America, VC-backed companies raised just $26 billion in Q1, down 36 per cent from the previous quarter, while deal activity declined slightly to 1,375. Europe-based startups, however, led the race by raising $8 billion in VC funding in Q1, which is a 48 per cent increase from Q4 of last year, even as deal activity dropped 4 per cent to 724 transactions.

The five most active VC firms globally in Q1 were New Enterprise Associates, Google Ventures, Norwest Venture Partners, Accel, and IDG Capital. The report also noted that mega rounds, or those valued at more than $100 million, dropped in North America and Asia in Q1 from previous quarter levels. Asia's mega rounds dropped to 38 in the first quarter from 48. Europe, however, saw a rise in mega rounds.

Asia's Largest Deals

While SoftBank recorded the largest deal of $1500 million in Q1, Virgin Group and Qualcomm Ventures marked the third biggest VC funding globally with $1,250 million transaction. The deal was announced at the end of February this year, when Chinese startup Chehaoduo raised $1.5 billion from the Saudi Arabia-aligned SoftBank Vision Fund.

The first quarter also saw North America minting 10 new unicorns, beating Asia for the third-straight quarter. Asia minted five unicorns while Europe produced three during the period. In terms of global expansion-stage median deal size, Asia posted an increase to $15.6 million in Q1 from $14.5 million in the previous quarter, while North America and Europe saw a decline.