Q2’24 Venture Pulse Report– Asia

E-commerce continues to attract large deals in Asia

Unlike in other regions, e-commerce and consumer focused companies continued to find traction with investors in Asia. The sector attracted the two largest deals in Asis during Q2’24, including a $1.9 billion raise by Singapore based marketplace platform Lazada and a $1 billion raise by India-based e-commerce company Flipkart. 

New energy remains hot in China, in addition to Semiconductors and AI

Both new energy and semiconductors continued to attract relatively strong VC investment from VC investors in China during Q2’24, led by a $693 million raise by China-based electric vehicle manufacturer Neta Auto and a $599 million raise by CRRC Times Semiconductor. While investment remains quite good compared to other sectors, VC deal activity in the EV space has slowed somewhat in China as the sector has become more crowded. Some consolidation is expected over the next few quarters.

AI companies were also very attractive in Q2’24, with retail focused company Zunyuan Supermarket raising $528.7 million, generative AI company Zhipu AI raising $400 million, AI and IoT platform company Terminus Technologies raising $277.8 million, and intelligent electric truck developer Windrose Technology raising $110 million. Many of the AI investments in China during the quarter focused on AI-enablement rather than on LLM offerings, including areas like robotics and improving workplace efficiencies. VC investors also showed strong interest in AI related to autonomous vehicles.

VC investment in Japan rises despite more challenging macroeconomic conditions

VC investment in Japan rose from $842 million in Q1’24 to $1.2 billion in Q2’24, despite some erosion in macroeconomic conditions, including the continue decline in real personal consumption, the inability of wages to keep up with inflation, and the uncertainty caused by the suspension of the sales and shipping of several vehicles in the wake of a quality scandal among certain automotive manufacturers.¹ VC interest and investment in deeptech was strong in Japan during Q2’24, particularly in areas like space tech, nuclear fusion, biotech, and AI. During Q2’24, Pale Blue Inc. raised $9.6 million in Series B funding,² while Kyoto Fusioneering attracted $9.9 million in funding as part of a Series C extension round.³

Japan has experienced quite rapid growth in its VC ecosystem in recent quarters, with the amount of funding per VC transaction growing on average. Growth stage investments remained a challenge, however, which could impede the continued growth of Japan startups as they work to achieve scale. 

Political stability in India suggests hope for VC investment

VC investment in India rose considerably between Q1’24 and Q2’24 — from $2.9 billion to $4 billion. During the quarter, VC investors in India focused on more traditional sectors for investment, including fintech, electric vehicles, and consumer technologies. Unlike many other jurisdictions where investment in the consumer-focused technology space has dried up dramatically, India’s population and demographics has kept investment in the space relatively resilient. During Q2’24, e-commerce platform Flipkart raised $1 billion, instant grocery delivery company Zepto raised $665 million, and consumer lending company KreditBee raised $209 million.

Trends to watch for in Q3’24

Heading into Q3’24, AI and alternative energy vehicles are expected to remain attractive in the eyes of VC investors. VC investment in China is expected to remain relatively soft in Q2’24; although it could pick up from the weak level seen in Q2’24, it may not rise to the level seen in Q1’24. A number of China-based companies are continuing to prepare for IPOs, with the hope that the IPO market will rebound in 2025.

In India, VC investment is expected to continue to pick-up during Q2’24, driven in part by the country’s stable government and positive economic environment. In Japan, VC market activity is expected to remain solid, although growth stage funding will likely remain a challenge. As domestic startups begin to grow and expand outside of Japan, the country may be better positioned to attract investment from overseas.