Deal activity to VC-backed companies in Asia dropped sharply for the third-straight quarter, according to data in the Q2’16 KPMG And CB Insights Venture Pulse report, highlighting concerns regarding global economic uncertainty, the slowing of the Chinese economy and depreciation of the Chinese currency. Deal activity in other parts of Asia also shrank significantly, with India-based funding, in particular, dropping well under $600M this quarter.
Annual trends: Investors deployed $14.6B across 732 deals to VC-backed companies in Asia in H1’16
Asia witnessed a steady rise in deal activity to VC-backed companies in recent years, accompanied by an especially dramatic increase in funding. However, at the current run rate, 2016 is on track to end both annual growth streaks, with just $14.6B invested across 732 deals over the first half of the year.
Quarterly trends: Deals to Asian VC-backed companies drop for third consecutive quarter in Q2’16
Q2’16 saw deal count drop a further 12% from the already-cooling activity in Q1’16, and is now down 24% from the deal activity peak seen in Q3’15. Funding edged up 2% to $7.4B, mostly lifted by several $500M+ rounds to Didi Chuxing, Weiyang Technology, and Ucar Group.
Asian seed deal share moved upward in Q2’16
Asian seed deal share rose sharply to a 5-quarter high of 39% in Q2’16, up from 33% the quarter prior. In absolute terms, seed deals held relatively steady from Q1’16, while deals in most other stages fell (particularly Series A, which saw a corresponding drop in deal share).
The 10 largest Asian rounds of Q2’16 together represented more than $4.1B in funding, more than half of the quarterly total for the continent. As mentioned before, established ride-hailing companies such as Gett, Didi Chuxing, and Ucar Group received a number of these biggest deals.
India funding craters to $583M
Within Asia, India has seen an especially dramatic drop in financing to VC-backed companies. Notably absent were the $100M+ mega-rounds abundant in previous quarters. Even in Q1’16, there were still at least 5 deals of $100M or more, whereas this quarter saw just a single deal of exactly $100M to Oyo Rooms. Indian unicorns like Snapdeal and Flipkart, who raised massive rounds and pushed up funding totals in quarters prior, have been relatively quiet as of late.
This dearth of mega-rounds contributed to a 59% slide in funding from Q1’16, while deal count also fell 12%, down to 111 deals.
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