Q1’24 Venture Pulse Report– Asia

Artificial intelligence high on radar of investors in Asia

AI attracted significant attention in Asia during Q1’24; in addition to Moonshot AI’s raise, South Korea-based AI-driven virtual telecom services provider Stage X raised $300 million, and China-based AI-enabled ESG-focused fintech company MioTech raised $150 million. China, in particular, continued to show interest in advancing AI and machine learning innovation, in tandem with innovations in chips and chips manufacturing.

Cleantech continues to attract big tickets in Asia

Cleantech and alternative energy continued to attract strong funding in Asia during Q1’24, particularly in China, where three cleantechs were among the largest deals in the region during the quarter: IM Motors ($1.1 billion), Huakong Power ($696 million), and Guangxi CNGR New Energy ($307 million). China also accounted for four of the world’s new cleantech and alternative energy focused unicorns in Q1’24, including Sungrow NewEnergy, Guangxi CNGR New Energy, Zhizi Auto, and Qiyuan Green Power.

Health and biotech also saw solid investment during the quarter, with raises by India-based PharmEasy ($421 million) and China-based Jixing Pharmaceuticals ($162 million). 

VC investment in China slow to materialize in Q1’24

Despite several large cleantech raises, VC investment in China fell from $15 billion in Q4’23 to only $11.5 billion in Q1'24 — the lowest total seen since Q1’20. This number is striking, despite a tendency for Q1 to be slow in China due to the timing of Chinese New Year and companies waiting to evaluate their year end financials before making major decisions. AI and new energy continued to be the most attractive sectors for investment in China, including subsectors like new materials manufacturing to support new energy activities.

Japan VC market healthy as ecosystem evolves

VC market activity in Japan was quite positive in Q1’24, with comparable results to Q1’23. A number of companies raised funding rounds, including consumer products company MOON-X ($23 million), biotech PRISM Biolab ($10 million). Oishii Farm Corporation — a US-based agtech founded by a Japanese entrepreneur — also raised $173 million during the quarter, in a deal that was led by Japanese telecom NTT. Semiconductor manufacturing also gained attention in Q1’24, as Taiwan-based TSMC opened its first factory in Japan; the Japanese government also committed up to $4.8 billion for TSMC to build a second plant to support the burgeoning AI industry in the country.

The number of VC and CVC funds continued to increase in Q1’24, reflecting the growing interest in, and maturity of, Japan’s VC ecosystem. Government support has also remained strong, with the government looking to increase startup funding significantly by 2027. Major sectors for investment in Q1’24 primarily focused on the government priority areas of healthcare, energy, and quantum computing, with increasing interest in decarbonization and automation technologies in particular.

Trends to watch for in Q2’24

Looking forward to Q2’24, VC investment in Asia is expected to remain relatively steady. While the consumer market is expected to continue to recover, any changes will likely occur at quite a slow pace. AI will likely continue to attract large deals, in addition to ESG related technologies — from battery technologies to EV value chain businesses and semiconductors.

In China, there is some concern about the impact of declining consumer confidence and the related drop in consumption. There is some expectation that the government will introduce policies to help boost confidence and the economy; should these policies materialize in Q2’24, there could be a subsequent boost to VC investor confidence in the latter half of 2024.

In Japan, VC investment and market building activity is expected to remain positive in Q2’24 as the government works to attract overseas startups to come to Japan. M&A activity is also expected to rise in Japan as startups look at M&A as a more realistic exit strategy than an IPO.