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Asia Startup Funding Plummets by 50% in H1 2023
Funding for startups in Asia experienced a significant drop of 50% during the first half of 2023 compared to the previous year. This decline was driven by a decrease in large, late-stage funding rounds, reflecting the global trend in the venture capital market. According to data from Crunchbase, funding in the region decreased from over $73 billion in H1 2022 to only $36.3 billion in H1 2023. Additionally, the number of deals also slowed down, declining by 40% from 5,402 deals in H1 2022 to 3,237 deals in H1 2023.
Q2 2023 Sees a 44% Drop in Funding
The second quarter of 2023 continued to witness a decline in funding, with a 44% decrease compared to the same quarter of the previous year. Funding dropped from $32.8 billion in Q2 2022 to $18.5 billion in Q2 2023. The number of deals also followed a similar pattern, falling by 38% from 2,508 deals in Q2 2022 to 1,564 deals in Q2 2023.
Late-Stage and Growth Funding Experience a Decline
Late-stage and growth funding were the primary contributors to the overall decrease in venture capital investment in Asia. In Q2 2022, late-stage and growth funding amounted to $18.4 billion in 246 deals. However, in Q2 2023, these figures dropped to $10.2 billion in 144 deals, representing a decline of 45% in funding and a 41% decrease in the number of deals. The decline in this segment was even more pronounced when considering the first half of the year, which saw late-stage and growth rounds totaling $19 billion—a staggering 53% drop compared to the $40.8 billion raised in the same period in 2022.
Early-Stage Funding Continues to Struggle
Early-stage funding in Asia faced its sixth consecutive quarter of decline. Startups in the region raised only $6.8 billion in 529 early-stage deals during Q2 2023, marking an 8% decrease from the previous quarter’s $7.3 billion and a substantial 42% decline from Q2 2022’s $11.7 billion. Although the number of deals dropped by only 4% compared to the previous quarter, it declined by 35% compared to Q2 2022, which witnessed over 800 early-stage funding rounds.
Angel and Seed Deals Reach a Low Point
Angel and seed funding rounds hit their lowest point since early 2021. In Q2 2023, these rounds amounted to only $1.5 billion, a decline of 42% from Q2 2022’s $2.7 billion. While the deal counts experienced a marginal drop from the previous quarter, with 891 angel/seed rounds announced in Q2 compared to 964 in Q1, there was a significant 38% decrease in deal volume from the same quarter last year, which saw 1,445 such deals announced.
Outlook and Challenges Ahead
Although funding in Asia showed a slight improvement in Q2 2023 compared to Q1, the continuous decline remains a cause for concern as the numbers fall even below the pace of 2020. Ongoing tensions between the United States and China further complicate the funding landscape, potentially disrupting venture investing in the region. The breakup of VC giant Sequoia Capital into three separate entities reflects the challenges faced by U.S. investors in the Chinese tech market. However, the revival of China’s IPO market and potential resumption of suspended IPOs, like Ant Group’s, could provide a much-needed boost for the tech sector and attract investor interest. Despite these potential opportunities, the headwinds in the Asia funding market may intensify, making navigation more challenging for startups seeking investment.
