Venture capital funding in Asia remains difficult with deal value falling to US$18.8 billion in the first quarter of this year, from US$22.9 billion in Q4 2023, according to data from KPMG.

Companies based in Greater China, particularly mainland China and Hong Kong, experienced a slow start to the year due to weak market sentiment with VC investment in mainland China down at US$11.5 billion in the first three months, compared with US$15 billion in Q4 2023. Overall, VC investment in China dropped to a 10-year low in 2023, indicating how recent global economic sentiment driven by higher interest rates is questioning the valuations of several Chinese start-ups.  

“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 2024, there could be a subsequent boost in VC investor confidence in the latter half of 2024,” according to a KPMG commentary.

In contrast, interest in Indian VC investment has picked up a bit at the start of 2024, although at a lower base than China’s. From US$1.6 billion towards the end of 2023, VC activity raised US$3.2 billion across 354 deals in Q1 2024, KPMG data show.

The fundraise by PharmEasy, an online pharmacy and digital health company based in Mumbai, is one of the largest on the subcontinent so far this year, generating US$421 million from the market. Around the same time, non-banking financial services company SK Finance raised US$160 million. Both companies plan to launch initial public offerings in 2024 if market conditions are favourable.

“Over a longer horizon, India’s robust fundamentals – underscored by its significant consumption headroom, demonstrated fiscal and monetary discipline, geopolitical positioning, and expanding digital backbone – will continue to fuel optimism among investors,” notes a report from Bain & Company.

Areas of focus for Asian VC investment continue to evolve with companies involved in artificial intelligence and clean tech garnering the most interest. In China, three clean tech companies – IM Motors (US$1.1 billion), Huakong Power (US$696 million) and Guangxi CNGR New Energy (US$307 million) –were among the largest VC deals in the region so far this year. The IM Motors deal was one of the largest investments in China’s electric-vehicle sector in recent years following investments in EV peers NIO and Leapmotor.