Q1’20 Venture Pulse Report– Asia

After a resurgence in VC investment in Q4’20, Asia saw VC investment drop to a twelve-quarter low in Q1’20 despite three $1 billion+ megarounds. As COVID-19 emerged and spread throughout the region, the number of VC deals plummeted as VC investors, particularly in China, hit the pause button on deals.

Given that COVID-19 has and is shutting down a significant amount of economic activity and severely limiting the movement of people in and across jurisdictions in Asia, consumers are being forced to embrace new behaviours – such as online shopping, delivery, and e-commerce. These changing behaviours could have significant staying power over the longer term as people recognize how easy certain activities are. Over the long-term, this could drive much stronger investment in these spaces and more sustainable business models.

China bore the brunt of COVID-19’s impact throughout Q1’20, as evidenced by its drop in total VC investment to a twelve-quarter low, and a drop in the number of VC deals to a level not seen since Q4’14. The substantial drops came despite the megarounds raised by Kuaishou ($3 billion) and Yuanfudao ($1 billion).

The majority of sectors in China saw downward trends in VC investment during the quarter, however, edtech, life sciences and biotech, and logistics companies continued to attract attention, likely due to their relevance during the current situation. In addition to Yuanfudao’s funding round, edtech company YunXueTang raised $100 million during the quarter. Several life sciences companies also raised rounds in Q1’20, including Transcenta Holding ($100 million), CANbridge Life Sciences ($98 million), and CF PharmTech ($89 million).

While the economy in China saw some signs of recovery at the end of Q1’20, the outlook for the next quarter remains very concerning with consumption in the country expected to take a substantial amount of time to recover. China’s central government is currently undertaking significant efforts to help stimulate the economy.

While VC investment in Q2’20 is likely to remain subdued given the ongoing challenges posed by COVID-19 globally and the potential threat of reintroduction of the virus, it is expected that a number of areas could start to see renewed investment. For example, AI has long been a hot area of investment in Asia; it could potentially see momentum rebuild quickly given its applicability for monitoring and tracking population health and disease spread.