How the Coronavirus Outbreak Could Affect Start-up Funding in Asia
The Chinese stock market indexes plummeted more than 7.5 per cent when they reopened on Monday after an extended Lunar New Year holiday, wiping out more than $445 billion in market value after investors panic sold their positions due to the worsening coronavirus outbreak.
The number of people contracting the virus has been steadily rising across the world, but China and Asia have been the worst hit.
The outbreak could cost China more than $60 billion, some media reports say, which is bad news for an economy that reported its worst growth last year in nearly three decades, thanks to rising debt levels, and an expensive trade war with the U.S.
Startup funding too could take a substantial hit, going by previous outbreaks, especially if Beijing doesn’t take steps to resolve the issue quickly.
Asia was the second most active VC market globally, following the U.S., with 5,295 deals and $63 billion in funding in 2019, a PwC/CB Insights MoneyTree report recently showed. The outbreak has raised questions about investment flows into Asia, and many start-ups have already started wondering if they will be able to survive the lack of funds.
We look at two major outbreaks in recent times to see how private funding was affected.
SARS (Severe Acute Respiratory Syndrome)
The SARS coronavirus started spreading rapidly in 2003, affecting 26 countries and more than 8,000 peeple. It originated in 2002 in China’s Guangdong province, and, much like the current Wuhan coronavirus, was thought to be an animal virus, according to the WHO.
The outbreak was fully contained by 2004.
Asia’s private market funding in 2003 fell 27 per cent, versus 2002, while in 2004, it fell 29 per cent, according to data from CB Insights.
After the WHO declared the outbreak ‘contained’, deal volume and funding recovered, and after a year, funding hit record high.
The earliest recorded outbreak of Zika virus disease was in 2007, in Micronesia, followed by another one in 2013 across Pacific countries. The latest outbreak happened in 2015 in Brazil, and spread quickly to the rest of South America, the U.S., and other parts of the world, according to the WHO.
Zika was declared a global emergency in February, and the emergency was called off in November 2016.
The outbreak of the disease mostly transmitted by the Aedes mosquito caused a 50 per cent drop in funding activity in South America in 2016 versus 2015, according to CB Insights.
In Q1 of 2016, when the WHO declared Zika a global health emergency, private market funding was just 25 per cent of its level in Q1 2015.
The year after the emergency was called off, private funding in South America reached a record high of $2.9 billion, according to CB Insights.