Asia

Deal volume in Asia has been quite subdued this year, with numbers well off pace of 2024’s totals across most deal stages at the end of Q3’25. D+ deals were the exception, with deal volume well-positioned to see a modest increase year-over-year should trends continue through Q4’25, although average deal value was substantially lower. The increase in deal volume likely reflects the rapid maturation of startups in Asia — particularly in areas like AI and deeptech, and in jurisdictions like Japan, India, and Indonesia — and the growing number of companies raising later funding rounds.

At the same time, the decline in VC deal activity in China has likely brought down average deal sizes given the number of very large late-stage megadeals China has seen historically. It is likely that current D+ deal sizes also reflect startups taking a more realistic look at their funding requirements and raising only the amounts they need in order to better position their organizations to meet identified KPIs.

AI remained a central focus for VC investment in Asia during Q3’25, with China attracting the largest share of capital. The quarter’s biggest raises included GLP ($348 million), a data center infrastructure developer, and MiniMax AI ($300 million), which specializes in text-to-video AI. In addition, smartphone-focused AI agent developer Z.ai secured $139 million, underscoring the diversity of AI applications gaining traction in China.

In Japan, AI deal activity also accelerated across a range of use cases. Notable rounds included T2 ($33 million), focused on autonomous driving systems; and Terass ($21 million), a real estate enablement platform. Japan is increasingly positioning itself as a hub for AI and deeptech innovation, supported by government initiatives aimed at boosting domestic semiconductor production and other critical infrastructure needed to sustain growth in these industries.

Together, these developments illustrate that AI continues to anchor VC activity in Asia, with China driving large-scale capital deployment and Japan emerging as a strategic center for innovation in AI and deeptech.

IPO exit activity in Asia has gained meaningful traction in 2025, with total value by the end of Q3 already surpassing the full-year 2024 figure and on pace to exceed 2023’s results as well. Much of this momentum has been driven by Hong Kong, which has seen a diverse mix of listings in recent months across sectors including industrials, consumer, health and life sciences, energy and resources, and financial services.

Japan has also recorded solid IPO activity during Q3’25, though rising interest rates and stricter listing requirements have tempered enthusiasm among startups considering this route. As a result, a growing number of Japanese startups have begun to prioritize M&A exits as a more attractive alternative.

Overall, the strength of Hong Kong’s IPO pipeline and Japan’s shifting dynamics underscore that while public markets in Asia are showing renewed vitality, exit pathways remain highly market- and policy-dependent across the region.

VC investment in China remained quite soft in Q3’25, driven in part by geopolitical tensions, a challenging economic environment, and ongoing challenges in China’s real estate sector. The declining size of VC deals likely also reflects VC investors in China shifting their strategic focus away from chasing individual unicorn companies. Given the current market climate, many have turned their attention towards supporting a breadth of companies — particularly in the quickly evolving AI space — in order to spread their risk around. 

VC investment in India remained slow in Q3’25, driven in large part by global geopolitical uncertainties and significant trade tensions with the US. While interest in India remains high, VC investors have found it difficult to predict what might happen day-to-day, leading them to hold back from making any major funding decisions. The largest deal of the quarter in India was a $140 million raise by consumer goods delivery focused company Mitra.

Despite the soft VC investment in Q3’25, there continued to be optimism in the market given the growth in startup exit activity — particularly in terms of IPO exits. During the quarter, IPO activity was quite strong compared to previous quarters; for example, rent-a-service company Urban Company held a very successful IPO on the Mumbai National Stock Exchange, with shares rising 74% in first day trading.¹

In Q3’25, VC investment in Japan slipped slightly to $1.3B from $1.6B in Q2 as investors stayed cautious amid trade tensions, political uncertainty, and high interest rates. The new U.S.–Japan trade deal, with its 15% baseline tariff, is expected to challenge hardtech startups like robotics and semiconductors, while having less impact on AI, biotech, and domestically focused firms.

Most of the funding still came from Corporate Venture Capital (CVC), which remains a steady force. Investors largely steered clear of mega-deals and instead leaned into early-stage bets, especially on startups with strong domestic markets or diversified global strategies.

Standout raises this quarter included Newmo (¥17.9B), and Terra Charge (¥10.4B). Hot sectors continue to be AI, healthcare, energy, space, and mobility, though polarization is clear: proven companies and large VC funds are thriving, while smaller funds and weaker startups face bigger hurdles.