Venture capital funding for Chinese technology startups dropped by 51.5% year on year in the fourth quarter, according to a report by government institute released on Friday.
Why it matters: The decline affirms the so-called “capital winter“ which affected companies and investors in China’s tech sector over the course of 2019. The term refers to a significant slowdown in investment and fundraising activities.
Details: Chinese tech startups closed 403 funding rounds and raised a total of around $6.8 billion from venture capital investors in the fourth quarter, according to a report (in Chinese) by the China Academy of Information and Communications Technology, a research institute under China’s Ministry of Industry and Information Technology.
- To compare, there were 564 rounds which raised $14.1 billion in the same period in 2018.
- Early-stage investments, including seed and Series A funding rounds, accounted for 73% of all investment activities in the quarter.
- More than half of the money raised in the quarter went to Shenzhen-based Tenglong Holding Group, a data center service provider which closed a Series A worth RMB 26 billion (around $3.7 billion). Participating investors included Morgan Stanley Asia and China Nanshan Development Group, a real estate developer.
- Tenglong’s lion’s share of total funds raised also means that funds raised by other Chinese startups were significantly lower than the same period in 2018.
- The dramatic drop is attributable to “a cautious investment climate” and “limited investment returns,” according to the authors of the report.
Context: Some 336 startups in China were forced to cease operations in 2019, according to the Financial Times. These companies collectively raised RMB 17.4 billion from investors.